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Billionaire Izzy Englander is exploring opening up the ownership of his $76bn hedge fund Millennium Management to its top executives for the first time, in the latest step to prepare it for life beyond its founder.
Englander, 77, has kept sole ownership of New York-based Millennium for its 36-year history.
It is still working out how to structure a distribution of equity to its key people, according to people familiar with the situation.
But the move is intended to incentivise Millennium’s top ranks and give them another way to benefit from any future success of the business while aligning their interests with those of the hedge fund’s investors, the people added.
“Opening up the equity would be a massive statement by Izzy,” said one of the people. “It would be a clear sign that he wants the firm to survive him.”
Millennium declined to comment.
Englander has shown no signs he is planning to step back and is still crucial to decision-making. But over the past few years he has embarked on an institutionalisation of a business that some say now resembles a division of an investment bank more than a hedge fund.
The Millennium founder said in his annual investor letter last month: “What we’ve built is larger than any one person, and it’s designed to endure and thrive.”
The firm is in early-stage talks with BlackRock about a strategic partnership that could lead to the world’s largest asset manager taking a small equity stake in Millennium.
Since launching with $35mn under management in 1989, Englander has built Millennium into one of the world’s largest hedge funds, which now manages $76bn in assets, employs 6,100 people and has notched up average returns of about 14 per cent a year. It gained 15.1 per cent last year and was up 0.45 per cent in January, investors said.
Alongside Ken Griffin’s Citadel, it is one of the dominant multi-manager firms in what has become the hottest part of the $4.5tn global hedge fund industry.
Rather than relying on a single star trader, Millennium allocates capital across 330 investment teams trading fundamental equity, equity arbitrage, fixed income, commodities and quantitative strategies in liquid markets, all within a tight risk framework.
Interests of the hedge fund’s staff are already aligned with its clients’ through employees’ investment in its flagship fund. More than $10bn of the funds managed by Millennium belong to Englander and its employees.
Englander has in recent years taken a number of steps to further institutionalise Millennium, however.
He has established a trustee advisory board; secured Millennium’s capital base by moving the vast majority of investors into a five-year share class; and built out its leadership team, notably with a series of senior hires from Goldman Sachs. He also changed terms so that investors have no special option to redeem if something happens to Englander.
Englander also changed its fee structure in 2022 so investors are required to pay a minimum fee regardless of the fund’s performance, and on top of expenses.
Investors now pay annual fees of about 1 per cent of assets or 20 per cent of investment gains, something bankers described as akin to a management fee.
Such predictable revenues are easier to model and value than volatile performance fees, potentially paving the way for a sale of a minority stake in the business or the distribution of equity among senior management.
Millennium has also moved to secure additional sources of growth. Last year it raised an extra $10bn in assets and it is considering launching a fund that would invest in less liquid assets, including private credit. It would be the first new fund since it was founded more than three decades ago.
