BlueCrest Capital Management has likely hired more new staff in the last year than any other hedge fund. Undoubtedly, BlueCrest’s growth plans have been aided by the shrinking of the sell-side – it’s added several bankers from Nomura, Credit Suisse, Deutsche Bank and UBS. BlueCrest also uses one unusual retention tool to help keep its staff intact.
In a recent blog post published by the New York Times, former M&A banker William Cohan takes the fund to task for a practice that wasn’t known to the public until recently: BlueCrest operates a $1.5 billion internal hedge fund that’s open only to partners. Investors have no access to the staff managed account, which, according to one of Cohan’s sources, posted annual returns “well above” those of the firm’s two hallmark funds last year. The staff-only account invests in internal and external strategies. However, BlueCrest partners also have roughly $2 billion invested in publicly-available funds, so they do admittedly have skin in the game.
Cohan argues that the internal fund creates a conflict of interest – one that is fairly easy to see. Why are employees investing in a separate vehicle rather than the one they actively manage for clients? BlueCrest told Bloomberg earlier that procedures are in place to avoid all conflicts of interest – including preventing one fund from trading ahead of the other – but it also acknowledged that the fund is designed to help retain talent.
Whether you agree with it or not, the internal fund is open to all partners, of whom BlueCrest has added many as of late. And it’s still hiring.
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