NEW YORK (HedgeWorld.com)–Eric Mindich, some of his fellow alumni of The Goldman Sachs Group Inc. and Stuart Hendel, formerly of Morgan Stanley, have founded a hedge fund, Eton Park Capital Management LP, with more than US$3.5 billion in assets.
A spokesman for Eton Park declined any comment.
Bloomberg reported, though, and a source confirmed, that the new fund is multi-strategy, focusing on equity and distressed debt. Other Goldman Sachs veterans working with Mr. Mindich include Erland Karlsson, formerly the co-head of Goldman’s principal strategies department; Scott Prince, formerly co-head of its equity trading and global equity derivatives desks; and Edward Misrahi, former head of its proprietary trading.
There are reported to be more than 50 people now employed at the fund’s new Manhattan headquarters. Trading began November 1.
Mr. Mindich, though, is the highest profile figure of the new team. In the 1990s, he was dubbed the “Doogie Howser” of Wall Street (after a television comedy series about a precocious doctor).
Mr. Mindich was all of 27 when he made partner at Goldman Sachs. In January 2003, he became senior strategy office and chairman of the banking giant’s global strategy committee. That November, at 36, he left that position in what was then widely described as a retirement–though the joys of poolside lounging and golf seem inadequate for Mr. Mindich.
A 1999 Article
His new team also includes Stuart Hendel, formerly of Morgan Stanley’s prime brokerage division, now Eton Park’s chief operating officer. In 1999, Mr. Hendel authored an analysis of the relationship between prime brokers and their hedge funds, for the Managed Funds Association periodical, the MFA Reporter.
He explained in the article that there are three reasons why hedge funds use multiple brokers for the execution of trades: anonymity, access to new issues and best-quality execution. A hedge fund using a single broker would lose anonymity because that broker would become familiar with its positions and strategies. Further, since executing brokers allocate their new issues among their best customers, hedge funds spread their commissions in order to partake of deals from several directions. Furthermore, some brokers may be better than others at executing different types of transaction, and a hedge fund will want to take advantage of the strengths of each. He also mentioned, although he put less stress on, another consideration: They spread around commissions in order to get the soft dollar services from each direction.
It is this need for multiple brokers that leads to a need for coordination and for a single prime broker, the article said. “If a fund were to clear all their trades at the brokers with which it executes, it would be extremely difficult to track and reconcile positions, corporate actions and performance. Furthermore, a hedge fund cannot fully benefit from scale on its margin financing or borrowing of stock unless it consolidates its balances at one broker. A prime broker enables a fund to execute all over the Street, while domiciling and financing its position at a single firm.”
With his own move from Morgan Stanley to Eton Park, Mr. Hendel will now have the opportunity to study that relationship from the other side of the table.
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