Guillaume Rambourg’s new long/short equity hedge fund, Verrazzano Capital might be the biggest hedge fund launch of the year.
Rambourg comes from the formerly huge ~$6.5 billion British hedge fund Gartmore, which used to have 2 star portfolio managers: Rambourg and Roger Guy.
Then they suspended Rambourg. It all went downhill from there — for Gartmore.
For Guillaume on the other hand, just wait and see. The fund experienced over $1 billion in redemptions when he left, and his new fund, named for the bridge where the New York Marathon begins, expects to raise ~$1 billion. He plans to launch in Paris with Karim Moussalem, who was made a managing director in 2007 and was the head of cash trading at Goldman Sachs, and left the US investment bank after almost a decade for a senior investment role. A number of other big names have also been hired, and we’ll introduce you to them in the following story.
Without further ado, here’s the incredible story of how Rambourg ditched Gartmore and turned an investigation from the FSA into a launching pad for an awesome new career: hedge fund founder. (Word is that Guy originally had plans to co-found the fund, but has not signed on.)
Gartmore's star portfolio manager, who owns 4% of the firm (according to the Times), is accused of trying to influence his traders into using specific brokers to execute trades.
He allegedly violated a rule that banned fund managers from telling Gartmore's trading staff which brokers to use on share deals.
In a letter to investors, Gartmore's head of UK retail writes:
'We have suspended one of our leading fund managers because we suspect that he may have breached internal procedures relating to directing trades which is one of the controls that we have in place.'
They say Rambourg's 'single, isolated and inadvertent breach' did not disadvantage the relevant fund and its investors.
Investors wonder, What the heck is Gartmore doing?
April 2010: Gartmore investors rage, furious that the fund suspended a money-maker over something trivial
'If his employer has damaged his reputation for no reason, will Rambourg leave?' ask Gartmore investors.
Investors worry about losing a money-maker because despite the suspension, there is no evidence that Rambourg did anything wrong.
The only concrete evidence that suggests that he 'benefited' from using specific brokers comes from Reuters, who said that some brokers have donated money to Rambourg's charities.
Yet the fund suspends him, which looks really bad for both parties. Rambourg's reputation goes instantly from star trader to trader basically accused of taking kickbacks.
Despite being a 'single, isolated, and inadvertent' breach, Gartmore suspends Rambourg for one month.
During that month, investors redeem £1.1 billion.
The fund still has around $23.5 billion in assets under management at this point.
The FSA opens its investigation into Rambourg in June 2010, a few months after its initial inquiry.
The fund had returned him to his status as a portfolio manager, but once the investigation hits, it must suspend him again. It says it will reinstate Rambourg as a portfolio manager 'subject to a satisfactory outcome of the FSA investigation.'
November 2010: Roger Guy, the firm's other star portfolio manager, resigns. The fund hires Goldman to arrange an emergency merger.
Gartmore's star portfolio managers come out on top. A news report says the new fund they are launching together is 'expected to attract a lot of investor interest.'
Having ditched Gartmore, it sounds like they're starting their own fund.
Word is that Guy is not signed on to the fund. We hear that instead of joining Rambourg, he might do something else.
The fund will be in Paris and around 10 traders have been hired. The strategy will be long/short equity, similar to the fund Rambourg and Guy ran at Gartmore.
The big new hires: Karim Moussalem, who was made a managing director in 2007 and was the head of cash trading at Goldman Sachs. The founder of Lyxor Asset Management, Murielle Maman; a senior investment officer at UBS' hedge fund division, Tim Williams and former Gartmore senior analyst Tomás Pintó. 10 other employees have been recruited for trading operations.
Fun fact: When Guillaume was raising money for Alzheimer's research, Moussalem donated over $300.