Millennium and Engineers Gate Wind Down Hedge Fund Partnership

(Bloomberg) — Millennium Management is in the process of getting back money it gave Engineers Gate to trade on its behalf after the hedge funds agreed to end their more than three-year partnership.

Engineers Gate will stop managing Millennium’s money by the end of this month, according to people with knowledge of the matter. The companies mutually agreed to terminate the separately managed account, the sources said, asking not to be identified because the details are private.

Engineers Gate wants the capital in the separate account to have the same liquidity terms as its fund, including quarterly withdrawals in normal markets and the ability to gate at investor level during periods of stress, one of the sources said. The two firms began discussions about whether to restructure the relationship but could not agree to liquidity terms.

Engineers Gate’s hedge fund rose 50 basis points this month through March 20 and is down about 7% this year, one of the sources said.

Millennium viewed Engineers Gate’s mandate as a $3.6 billion allocation, including leverage, while Engineers Gate calculated the allocation at about $1.5 billion, reflecting different internal measurements of the same relationship, the people said.

Engineers Gate is in the process of recapitalizing Millennium and will start with around $4 billion in assets in the hedge fund from April, the sources added.

Representatives of the two multi-strategy hedge fund firms declined to comment.

The decision marks the end of one of Millennium’s largest partnerships with an outside manager. The $86.7 billion investment giant has spent years expanding its capital beyond its own investors, tasking money managers with running separate accounts and even helping spin off new hedge fund firms.

Since its founding in New York 12 years ago, Engineers Gate has grown from a small collection of equity-focused quantitative strategies into a diversified investment platform.

Earlier this year, Millennium increased its investment in Engineers Gate by $300 million as part of the firm’s new capital raise.

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