Hedge Fund Startup Raises $1.3 Billion, Then Takes a Rare Step

Former Citadel money managers Niall O’Keeffe and Tio Charbaghi shut their startup hedge fund to new investors on the first day of business after raising $1.25 billion in Europe’s biggest launch this year.

The duo’s London-based FIFTHDELTA fund that bets on rising and falling stocks commenced trading on Thursday, according to Chief Executive Officer Caroline Bradley. It’s now closed to new investors for the next year to control the amount of capital it runs, a rare step by hedge fund startups.

The capital-raising success defies accelerated outflows from peers deploying similar long-short strategies, indicating there’s still demand for experienced money managers. Investors pulled $9.4 billion from such funds in the first five months of this year, taking total outflows since the start of 2019 to about $70 billion, according to data compiled by eVestment.

FIFTHDELTA’s investors “shared our vision for the next evolution of fundamental long-short investing,” said Bradley, who joined the firm from Citigroup Inc. She didn’t disclose the names of her firm’s backers.

Hedge funds that focus on buying and selling shares have faced investor revolt after capturing most of the market’s downside in recent years, but little of the upside. When stocks tumbled in March last year, 87% of those in a Bloomberg equity hedge fund index lost money, with half declining by more than 10%.

O’Keeffe and Charbaghi, who worked together for about seven years at billionaire Ken Griffin’s hedge fund firm, focus their bets on industrial and technology stocks globally. While they will take in further money from their existing clients, they won’t be accepting cash from new investors.

Such steps are common among older firms, who restrict capital inflows on fears that running bigger funds might dilute returns. FIFTHDELTA is only the second known hedge fund startup in London in recent years to have started rejecting new investors from day one. Martin Taylor’s Crake Asset Management also closed to new investors after raising about $1.6 billion in 2019.

FIFTHDELTA currently has a staff of 22 people, with 17 in its investing team.

©2021 Bloomberg L.P.

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