By Hedge Fund Insight staff
Stephen Schwarzman, the Chairman and CEO of The Blackstone Group, was recently asked which of the Group’s hedge fund businesses was doing particularly well. His answer was to select Blackstone Senfina Advisors, a business launched as recently as 2014.
Senfina Advisors is the Blackstone unit that mimics Izzy Englander’s Millennium Partners. It is a multi-manager hedge fund platform and is Blackstone’s proprietary multi-strategy business within Hedge Fund Solutions. Senfina is intended to provide additional capacity and diversification for Blackstone’s hedge fund clients. A recent iteration of the Millennium Partners model has been to put some trading teams in their own dedicated management companies. At Senfina each team of traders will be housed in a separate management company. The initial conception was that the managers would not be Blackstone employees, but, for more than a year, they would be bound to manage only money from the firm’s clients.
The official modus operandi states that Senfina aims to capitalize on longer time horizon public market investment opportunities with a deep research process focus. The operating style reflects a requirement to run concentrated portfolios. The positions proposed by each manager are assessed by a trio of senior Blackstone executives including CEO J. Tomlinson Hill, which is an indication of the commercial significance of the project to Blackstone. Hill is also involved in assessing managers before they join the platform. The other two members of the oversight group are Parag Pande and Gideon Berger. Parag Pande was hired from Ziff Brothers Investments to head Senfina Advisors. He is a portfolio manager by background and ran the industrials book at Ziff Brothers.
The winding down of Ziff Brothers hedge fund operation in New York helped with other hires, notably Brian Siegel, the former head of operations at Ziff, and Brenda Pai a long/short equity specialist. The former head of risk management at Citadel, Sasi Digavalli, was hired to help oversee the investments within Senfina Advisors.
Senfina provides investors with exclusive access to a range of underlying portfolio managers, who are employed by their respective firms, and charges a basic annual fee of up to 2 percent based on average assets under management. In addition to the basic fee, investors pay for trading and other costs, plus a performance fee on profits between 15 percent and 20 percent.
The first portfolio managers to manage capital for Blackstone Senfina were David Briggs (Dulcet Capital Management), formerly the head of energy investments at Ziff, and Billal Sikander a senior analyst at Serengeti Asset Management. Whilst Blackstone does not publicly list the portfolio managers running capital for Senfina Advisors it is thought that Will Cook at Sunriver Capital Management and Eli Cohen of Crescent Park Capital have explored the opportunity. Both the latter managers were previously employed at Ziff Brothers Investments.
Stephen Schwarzman, Blackstone’s Chairman, was right – Senfina has been doing particularly well in performance terms and asset growth. In the middle of last year assets under management at Senfina were $792 million. Joan Solotar, Head of Multi-Asset investing at Blackstone, has said publicly that the unit is running about $2 billion of capital at the moment. Whilst Blackstone expects its teams to beat indices by at least four percentage points over the long term the first few teams in have done considerably better in the medium term. According to the Wall Street Journal Senfina returned 23 percent between January and November of last year.
Blackstone has big ambitions for Senfina Advisors; management expect to have multiple billions in this new platform by the end of 2016. To achieve this the superior returns have to continue and more of Blackstone’s institutional investors will have to buy into the concept. Public filings* show that Senfina Advisors had 10 clients late into last year. Capital allocations have been made from other Blackstone funds such as the Blackstone Diversified Multi-Strategy Fund. The largest external source of capital so far is the Alaska Permanent Fund Corporation which put $300m into Senfina. The quasi-SWF has given Senfina Advisors a slot in the Absolute Return portion of its assets and allocated a benchmark of LIBOR plus 6%.
Ultimately Blackstone is looking to 30 distinct teams that will start with at least $100 million apiece. The latest manager to join is former Carlyle Group associate and hedge fund analyst Raghav Chopra. He launched a new technology-focused long/short equity fund last month. Chopra’s New York-based Kanha Capital was reported to have launch day capital of around $25m, which suggests that either Blackstone’s capital allocations will vary, or that their capital did not clear in time for day-one trading.
The Blackstone Group is looking to broaden the pool of managers from which it draws talent for Senfina Advisors. Blackstone is in the process of searching for portfolio managers in the UK, though it is too early yet to know what investment strategies will be added.
Blackstone has ambitions for Senfina Advisors in both scale and performance. Blackstone Group would also like the unit to have endurance – Senfina means “everlasting” in Esperanto.
The Blackstone Group elsewhere on HFI:
The Hedge Fund HOT 100 2014 (Mar 2014)