Marshall Wace, the hedge fund, has tapped a top executive from its private equity backer KKR to run its US business.
Todd Builione, a partner and global head of private wealth at KKR in New York, is joining Marshall Wace as head of North America in September, the two firms said on Monday. He will replace Michael Sargent, who will retire in January after almost two decades at the firm.
Founded in 1997 by Paul Marshall and Ian Wace, Marshall Wace has grown into one of the world’s leading hedge funds. It is best known for its Tops Market Neutral fund, which analyses buy and sell recommendations from about 1,000 external analysts, and its flagship Eureka fund, which is run by Marshall. About half of its assets are in systematic strategies that use computer algorithms.
KKR bought a 24.9 per cent stake in Marshall Wace in September 2015, an investment that Builione helped lead. It paid for the stake using 7.4mn of its shares, then worth $147mn, and an undisclosed amount of cash from its balance sheet. Since then KKR has increased its holding to 39.9 per cent. During this roughly eight-year period, Marshall Wace’s assets under management have almost tripled, from $22bn to $62bn.
The growth of groups such as Marshall Wace illustrates how the hedge fund industry is becoming increasingly concentrated in a handful of large, diversified businesses. The increasing costs of investing in technology and regulation have raised the barriers to entry for new players.
Builione already sits on the board of Marshall Wace through its strategic partnership with KKR. Before joining the alternatives giant a decade ago he ran Highbridge Capital Management’s hedge fund business and worked at Goldman Sachs. In a decade at KKR, Builione has been instrumental in building the group’s credit business, which now comprises 40 per cent of its overall assets.
“We look forward to working with [Todd] in his new role and deepening the strategic partnership between our firms,” said Scott Nuttall, co-chief executive of KKR.
The management change in Marshall Wace’s North American business will not result in a change to its distribution strategy. Most of its clients are institutional investors and the firm is not planning on going after the retail market, said a person familiar with the situation.
The bulk of its funds are closed or partially closed to new money. About three-fifths of hedge fund assets globally are from US investors, according to data provider Preqin.
This year Eureka’s performance is flat but it has delivered average annualised gains of 11.8 per cent since it launched in 1997, according to investors.* The Tops Market Neutral fund is up 2.88 per cent this year and has recorded an average annualised gain of 9.31 per cent since its November 2007 inception.
KKR runs more than $500bn across corporate private equity investments and strategies focused on loans, infrastructure and real estate.
*This piece has been amended to accurately reflect the performance of the Eureka fund.