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Diamondback Duo Starts Long-Short Hedge Fund With $1 Billion

Diamondback Duo Starts Long-Short Hedge Fund With $1 Billion

(Bloomberg) -- Rich Schimel and Lawrence Sapanski have started their new hedge fund with $1 billion in commitments seven years after shutting their previous firm, according to an email sent to investors.

Like Diamondback Capital Management, the duo’s Cinctive Capital Management is a long-short stock fund that uses multiple trading teams, each focusing on a specific sector. The firm has 11 teams and more than 20 investment professionals and plans to hire more people, said a person with knowledge of the matter, who asked not to be named because the information isn’t public.

Mega-size launches have become rarer in a tough fundraising climate for the hedge fund industry, as liquidations outnumber startups. New York-based Cinctive is one of the biggest launches this year, behind Woodline Partners, the firm that former Citadel traders Michael Rockefeller and Karl Kroeker opened last month with $2 billion.

“We think our model, which allows portfolio managers the ability to focus on their best ideas and offers incentives based on quality of returns, not the amount of capital allocated, more clearly aligns investor interests with ours,” Schimel said in a news release accompanying the client email.

Anchor Clients

The firm’s anchor investors are the Employees Retirement System of Texas and Paamco Launchpad, which both invested hundreds of millions of dollars, according to the person. The two institutions created a joint venture to seed hedge funds, with Cinctive as their first investment. They have agreed to keep their money with the firm for at least five years.

Cinctive, which is based in New York City’s Hudson Yards, has hired Barry Schachter as its chief risk officer. He previously managed risk at SAC Capital Advisors and Balyasny Asset Management. Richard Sapanski and Ed Wang, who together ran quantitative strategies at Diamondback, have both joined the new firm as co-heads of portfolio construction. Marc Greenberg, the former director of research at Point72 Asset Management, has joined in the same role.

Read more: Citadel Alum Schimel Taps AI as Fund Shoots for $1 Billion

Schimel and Sapanski have worked together for 14 years. In the early 2000s, they were at Steve Cohen’s SAC Capital Advisors. In 2005, they opened Diamondback, which at its peak managed $5.8 billion. That firm shuttered in 2012 following client withdrawals after signing a non-prosecution agreement stemming from an insider-trading probe. An appeals court later threw out a former Diamondback manager’s conviction and government regulators agreed to refund the firm some $9 million it had paid in a settlement.

In 2016, Schimel joined Ken Griffin’s Citadel where he ran Aptigon Capital, one of the firm’s equity investing units. He left about two years later and Aptigon was shut down this year.

To contact the reporters on this story: Katherine Burton in New York at kburton@bloomberg.net;Hema Parmar in New York at hparmar6@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, Melissa Karsh, Josh Friedman

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