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Schonfeld vs. Millennium: "Great culture, shame about the tech"

Schonfeld CEO Ryan Tolkin says the fund has a gentler culture than some rivals

Hedge funds Millennium and Schonfeld are not getting together after all. Bloomberg says Schonfeld pulled out. Steven Schonfeld reportedly called Izzy Englander at 5pm yesterday and informed him that the deal was off. Steven doesn't need Izzy after Schonfeld secured $3bn of verbal commitments from its new and existing investors 48 hours before some of them would have been free to redeem money from its funds. 

The canceled deal has implications for both Schonfeld and Millennium. For Millennium, it probably means hiring some more portfolio managers of its own as it can't place assets with Schonfeld. For Schonfeld, it possibly means spending more on technology.  

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As multistrategy hedge funds grow, investing in technology is increasingly important. For the biggest funds, like Millennium and Citadel, technology is a differentiator in a good way. For smaller funds, like Schonfeld, technology is also a differentiator, in less of a good way.

"If I'd known how bad the technology was here, I might not have joined," one Schonfeld portfolio manager tells us, speaking off the record. "The big question now is what Schonfeld does to upgrade it."

Schonfeld didn't comment for this article and Millennium declined to comment on its intentions regarding Schonfeld.  However, not all Schonfeld insiders say the technology there is an issue. Schonfeld began life as a quantitative hedge fund and systematic trading is its sweet spot. In 2015, it acquired Quantbot, a quant trading firm founded by Michael Bolto, a former electronic technologist at Morgan Stanley, which contributed to its infrastructure. "Schonfeld's main problem is that it expanded into macro and took its eye off the systematic equities ball," says one hedge fund recruiter. 

Most multistrategy hedge funds suffer a degree of employee churn, and Schonfeld's exits don't look extreme compared to those at some others. In recent months, however, it's lost people like Yang Lu, who preemptively joined Millennium as a senior quant, Victor Morange, a quant researcher who's gone to Brevan Howard, and John Bencic, a former cloud engineering lead, who's gone to ExodusPoint.

It's not clear whether these quants and technologists left in anticipation of the Millennium deal, or simply because they had better offers elsewhere. Insiders say Schonfeld pays less than other funds; there's a danger that pay could now fall further as money is diverted towards upgrading technology.

For many Schonfeld portfolio managers, though, the fading out of Millennium with its reputation for harshly imposing stop-losses, has a silver lining. Schonfeld CEO Ryan Tolkin has said that the fund prides itself on a gentler approach. One Schonfeld portfolio manager says this is absolutely the case: "The culture here is great; it's very collaborative," he says. Millennium would have been a problem.

Millennium's disappearance also looks like good news for the Schonfeld tech team, run by CTO David Neigler, who joined from Point72 in 2019. If the Millennium deal had gone ahead, Schonfeld insiders say it was their tech staff who would have suffered most. Instead, it now looks like Neigler may need to hire some new people of his own. 

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AUTHORSarah Butcher Global Editor

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