December 16, 2017

Asking Blackstone for Money for Your Hedge Fund

Former SAC trader, Ali Akay, is asking Blackstone for money for his hedge fund

Ali Akay sheds some light on asking Blackstone for money for your hedge fund. The former SAC trader is seeking seed money for his hedge fund reports Jesse Westbrook and Saijel Kishan at Bloomberg Businessweek. The hedge fund manager plans to invest in emerging markets.

Akay, 34, is in advanced talks with Blackstone to provide so-called seed capital for his fund, said the people, who declined to be identified because the discussions are private. Akay, in a phone interview yesterday, said he intends to start trading in December and that his London-based Carrhae Capital LLP will focus on emerging-market investments. He declined to comment on whether Blackstone will give him financing.

Some money managers have turned to Blackstone and other firms for startup financing, because after the 2008 collapse of Lehman Brothers Holdings Inc. roiled financial markets, investors such as pension funds sought stability in big, existing hedge funds. Two-thirds of the $118 billion of asset growth for hedge funds since 2009 has been at firms managing more than $5 billion, according to Hedge Fund Research Inc.

“I’ve been able to make money in all types of markets,” said Akay, who plans to restrict investments into his fund once assets under management reach $500 million. “What I’m excited about is that there are various dislocations occurring in the market and the prospect of having fresh capital to arbitrage these dislocations.”

Christine Anderson, a spokeswoman for New York-based Blackstone, the world’s largest private-equity firm, declined to comment.

SAC Capital

Akay in June left the European unit of SAC Capital, the $14 billion hedge fund founded by Steve Cohen that has produced gains of about 30 percent a year since it opened in 1992. Akay previously traded for Dallas-based HBK Investments LP, the hedge fund started by Harlan Korenvaes in 1991.

He also worked for Goldman Sachs Group Inc.’s Principal Strategies unit, the proprietary stock-trading team that shut down last year in response to new U.S. regulations restricting banks from risking their own capital on speculative bets.

Carrhae Capital’s six-person investment team will include two other former traders from SAC Capital. The hedge fund will invest in the stocks of companies based in emerging markets and companies that generate their profits from doing business in developing countries. Carrhae Capital derives its name from an ancient military battle in Akay’s native Turkey in which the Parthian Empire defeated the Roman Republic.

August Declines

The Roman general leading the campaign lost because of “arrogance, an inability to listen to his local allies, impatience and a lack of understanding of the local circumstances,” Akay said. “It reminds us that when you are going into emerging markets, you definitely want to know the local conditions and have a local network.”

Hedge funds focused on investing in emerging markets declined 4.6 percent in August, their worst month since May 2010, according to Hedge Fund Research. Hedge funds broadly fell 2.5 percent last month, according to the Chicago-based firm.

The losses were triggered by concerns about slowing global economic growth that prompted investors to sell assets of developing countries and buy holdings considered safer such as U.S. Treasuries.

No doubt Akay’s pedigree will help him in securing financing. Blackstone could lend the money at a high rate or it could become an investor in the fund.

It’s a strange time to be investing in emerging markets as they’re tumbling. By the time Akay gets his answer, the economic outlook may change. Perhaps now is the perfect time to be asking Blackstone for money for your hedge fund after all.

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