Jain Hedge Fund Costs Cut Into $750 Million Profits Last Year

(Bloomberg) — Running a multi-strategy hedge fund is expensive. Building one from scratch is even harder.

Bobby Jain’s hedge fund, the latest emerging market entrant, made hundreds of millions of dollars in profits last year, but much of that went to cover the investment firm’s front-loaded expenses as the industry veteran phased out the $5.3 billion he raised in 2024.

Multi-strategy investment firm Jain Global generated nearly $750 million in trading profits last year; But investors shared only a quarter of the gain after fees and expenses were calculated, according to people familiar with the matter. That means gross returns for backers have fallen to a net gain of about 3.7 percent, said the people, who asked not to be identified because the information is private.

Multi-strategy funds are currently the most expensive among their peers because they pass all costs on to investors. This setup is particularly brutal in the launch year, when a partially deployed pool of capital carries the entire cost base of a new operation. Industry studies have shown that clients keep around 40% of their profits in established multi-strategy funds.

Jain Global is a test case for whether newcomers can carve out a space for themselves in a world dominated by the expensive hedge fund model and companies like Citadel and Millennium Management that have taken decades to transform themselves into investment giants that trade across assets and continents.

Rather than building incrementally, investors supported the launch of Jain as a full-fledged platform from day one; this was a costly approach that put immediate pressure on performance. The assets raised were distributed slowly, which affected his fund’s returns because costs reduced a significant portion of the profits made.

Marlin Naidoo, head of global equity promotion at BNP Paribas SA, said of the sector generally: “What allocators appreciate is that it is a bit of a time-consuming and expensive business to build.” “There is a willingness to invest in this – building today to win tomorrow.”

Sources said Jain Global started with deployments of around $2 billion last year and ended with investments of around $5 billion in 50 trading teams.

Sources said the firm’s most successful money managers include stock portfolio managers Townie Wells and Mike Scheer. Sources added that Syril Pathmanathan, who focuses on bank capital relief, precious metals trader Amir Ravan and macro trader Ali Rauf were also among the major contributors.

A representative for the company declined to comment.

Jain, the former co-chief investment officer of Izzy Englander’s Millennium, struck out on his own in 2024, opening a hedge fund that has traded nearly a half-dozen strategies from day one and employed hundreds of people around the world. Jain likened this mission to landing three planes at the same time.

Jain’s Millennial alumnus Michael Gelband, who founded the largest hedge fund ever at $8 billion in 2018, initially generated mostly single-digit annual returns. But ExodusPoint Capital Management has delivered consecutive double-digit gains from its predominantly fixed income-focused strategy.

Jain’s clients initially understood that this would be an expensive venture, but they still supported his unprecedented launch plan, spending billions of dollars to make it one of the largest hedge fund launches in history.

His timing also helped. Citadel, Millennium and DE Shaw & Co. The industry’s biggest players such as have either stopped actively raising new money or even refunded cash over the years. Some assets looking for a new home have found their way into startups like Jain and other multi-strategy investment firms.

Raising cash is only half the battle. It is much more difficult to use this safely and effectively, especially for a fledgling operation where capital preservation is a priority. While team building has slowed due to prolonged non-competes imposed by rivals, volatile markets have made managers more cautious about putting capital to work. In the meantime, investors must continue to pay the switching fees that multi-strategy companies charge for technology, infrastructure and traders.

“The headcount, systems and offices are scaling much faster than alpha,” said Bruno Schneller, managing partner of multifamily office Erlen Capital Management. “Once the teams are in place, the systems are in place, and the capital is deployed, investors are no longer evaluating the potential. They are evaluating the results.”

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