ERIC MINDICH: His Prediction About The Hedge Fund Industry Was Spot On

eric mindich
Eric Mindich

For the past 17 years, Eric Mindich has held an impressive record at Goldman Sachs.He’s the youngest person ever to be named Partner.

Goldman gave him the coveted title at the ripe young age of 27 in 1994 and 17 years later, still, no one has been able to take his crown.

Some have come impressively close, like Dhruv Piplani who made Partner this year at age 29, but no one has been a stand-out star like Mindich.

Mindich, now 44, interned at Goldman starting his Sophomore year at Harvard (where he was a member of the Phoenix, the exclusive club that Mark Zuckerberg wanted so badly to be a part of). As soon as he graduated in 1988, he joined the firm as an employee. And by 1992, he was in charge of Goldman’s risk arbitrage team, made up of 25 traders (most of whom were much older than him).

By 1994, he’d made the firm so much money that they had to make him Partner. It must have been scandalous at the time. Partnership at Goldman Sachs is a big deal; it must be earned and it can be taken away (Partners get de-Partnered). Imagine how a middle-aged Goldman exec might have felt having his Partnership ripped away from him while a 27-year old (who was nick-named “Wall Street’s Doogie Howser” in the press) got the lucrative title.

But after 10 years, Mindich did one better. He bet that he could create value outside of Goldman, too, and bravely quit to start his own firm in 2003 with no hedge fund experience.

In 2004, he founded Eton Park with an asset level that hedge fund founders dream of: $2 billion, with expectations of reaching $3.5 billion within a year. It broke the record for the biggest launch at the time. Today, the fund manages about $13 billion.

One of the decisions Mindich made early on is unusual and risky for hedge funds: Mindich put 30% of the fund’s assets in private companies, the shares of which aren’t easily valued because they aren’t public.

The decision turned out to be decidedly prescient. At the time, the IPO market was slow, meaning that it was unlikely that the companies that Mindich held stakes of in his portfolio would debut on the public markets and generate significant returns for Eton Park.

However since then, and especially recently, shares in nonpublic companies have become a hot commodity. Today, there are firms like SecondMarket, which is based entirely on the exchange of nonpublic shares. There’s tons of speculation that many of them, like Facebook, will generate huge returns in future IPOs.

Mindich joined the hedge fund industry right as it was becoming the hot place to be, too. The years that paid off best for hedge fund managers began in the early 2000s and (lasted until the credit bubble burst). And since Mindich’s huge launch, hedge funds have begun managing more and more money, a trend that Mindich did not shy away from, despite naysayers like Marc Freed.

Freed, a principal with Lyster Watson & Co, a New York, a company that invests in hedge funds, said in 2005, “[Eton Park] is too big for outsize returns.”

Boy, was Freed wrong about that one. In 2010, the second biggest hedge fund in the world, Bridgewater, returned over 38%.

As for his the profits his fund has generated, Eton Park has earned higher than 10% on average since its inception through 2009. 

(Click here to download the WSJ article in which Freed made that prediction.)