Platt's BlueCrest to Return Outside Capital, Become Private Investment Partnership

Dec 1 2015 | 6:36pm ET

Michael Platt’s BlueCrest Capital Management will return all outside capital and revert to managing the private wealth of its founder, partners and employees. 

Outside investors account for approximately 85% of BlueCrest’s $8 billion in assets under management. They will receive three-quarters of their capital back before the end of January and 90% by the end of the first quarter, according to the company. 

BlueCrest attributed the decision to declining fees and rising costs, stating that “ongoing secular changes in the industry, including trends in fee levels, the cost of hiring the best trading talent, and the challenges in tailoring investment products to meet the individual needs of a large number of investors, have weighed on hedge fund profitability.”

“A Private Investment Partnership strategy of concentrating on a reduced number of funds, managed exclusively on behalf of BlueCrest's partners and employees, will facilitate higher returns and greater profitability for the firm's stakeholders, and give it greater flexibility to compete aggressively for trading talent,” the statement said. 

“Everyone knows the landscape has changed,” added Platt in an interview with Bloomberg. “We want to position ourselves to be free to adapt to the environment such as it exists.”

Divestment of the firm’s investment portfolios will be carried out in an orderly manner, balancing the requirements for speed and value for investors, according to the statement. 

Assets under management at BlueCrest peaked in at more than $37 billion in 2013. Since then, the firm has spun out Leda Braga’s $9 billion quant-trading fund Systematica, while disappointing performance has resulted in client departures. 

BlueCrest’s latest 13F securities filing lists roughly $3 billion across more than 840 securities. The equity portfolio is top heavy with Chinese exposure, including more than $400 million devoted to energy companies CNOOC and Petrochina alone. Other major positions include China Life, the S&P 500 SPDR ETF, Precision Castparts, and Broadcom. 

“We will run the fund with more leverage - we would like to be our own investors now,” said Platt in the interview. Institutional demand for safer returns in a period of ultralow interest rates has led to constraints on how much risk macro hedge fund managers can undertake, impacting their ability to generate profits and undercutting the industry’s traditional “2 and 20” model. 

Since inception in 2000, BlueCrest has generated more than $22 billion in trading profits for investors, according to the statement. The firm will maintain its nine global offices going forward, as well as three funds – an equity fund, an emerging markets fund, and an internal partner fund that invests in credit, currency and fixed income.

All others, including flagships BlueCrest Capital International and AllBlue, will close during 2016.

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