Diary of a Hedge Fund Manager: From the Top, to the Bottom, and Back Again

CHAPTER 1

CATCH A WAVE

The recruiter’s message was garbled and vague: Large, well-known private equity player looking to launch multi-strategy hedge fund. It was late November 2006. I already worked for a large, well-known hedge fund firm, Magnetar Capital. Magnetar was launched in April 2005 by a 39-year-old numerical savant named Alec Litowitz, formerly the Head of Equities at Citadel Investment Group and considered to be a master of merger arbitrage. Litowitz had joined forces with ex-Glenwood Capital Partners president Ross Laser. Man Group Plc had acquired Glenwood in 2000, producing a nice windfall for Laser; Litowitz, meanwhile, had been producing handsome profits at Citadel. Together, the two set up headquarters in Evanston, Illinois, outside Chicago and not far from Northwestern University. Magnetar opened its doors for business with $1.7 billion in assets under management. At the time, it was one of the largest hedge fund startups ever. Less than two years later Magnetar’s assets neared $4 billion, it had expanded its reach to open offices in New York and London, and it was charging after numerous forms of portfolio strategies not limited to merger arb or equities.

Around the time Magnetar was forming, I launched, along with my partner Harry Schwefel, a hedge fund management company called Falconhenge Partners, and a flagship hedge fund of the same name. We put up some impressive numbers, which eventually came to the attention of Laser, who proposed folding our team ...