(Bloomberg) -- Nicolas Monaghan, who’s at the center of a lawsuit between Schonfeld Strategic Advisors and his former employer Garda Capital Partners, is preparing to start his own hedge fund with capital exclusively from Schonfeld.
Monaghan, who specializes in bond basis trades, has got about $1 billion from the macro trading business of Schonfeld for his Mistral Capital, according to people with knowledge of the matter. He will run the money exclusively for Schonfeld for a period of time before taking external cash, the people said, asking not to be identified because the details are private.
Monaco-based Mistral is expected to start trading by mid-2025.
Garda sued Schonfeld last month for allegedly scheming to recruit Monaghan in violation of his non-competition agreement. Schonfeld “induced” Monaghan to improperly quit his position as “one of Garda’s most important portfolio managers,” according to the suit. Garda said Monaghan had generated more than $250 million of profits since joining the firm in 2019.
Monaghan and a representative for Schonfeld declined to comment. A Garda spokesperson didn’t have an immediate comment.
Schonfeld has been making a big push into macro and fixed income trading, after hiring industry veterans Colin Lancaster and Mitesh Parikh to lead the business in 2021. Mistral is the first external allocation of the firm’s Discretionary Macro & Fixed Income unit, which is intended to bolster its bond basis strategy that has been a money spinner for many of the world’s largest hedge funds. The division employs 38 portfolio managers across 20 pods.
Mistral joins a growing number of standalone hedge funds landing cash from multistrats, which are flush with capital and seeking to parcel out some of their money to outside talent. Izzy Englander’s Millennium Management is one of the most aggressive in farming out capital, with external managers representing about a 10th of its more than 330 investment teams. Schonfeld has also had a long history of backing outside traders.
Monaghan worked at Field Street Capital before his five-year stint at Garda. At Mistral, he will run a global fixed income relative value portfolio and is putting together a team of former colleagues including William Vozzolo and Thibault Cons.
Garda said in the suit that Monaghan and Cons agreed to non-competes in late 2022 when Garda allowed them to move to Zug, Switzerland, from Geneva for tax purposes. The non-compete provisions apply until the agreement expires in March 2026, according to Garda. Monaghan and Cons are not defendants in the case. Schonfeld has until Jan. 29 to formally respond to the suit.
It is the latest legal battle to erupt as Wall Street firms vie for talent in a war that’s sparked conflict, litigation and retaliation, while contributing to at least one outfit going bankrupt. Hedge funds are extending non-competes for longer, with Bloomberg News reporting this week that Citadel prolonged it for some of its portfolio managers to 21 months.
New York-based Schonfeld manages about $12 billion in external client capital. The firm’s main Schonfeld Strategic Partners gained almost 20% last year, while Schonfeld Fundamental Equity returned 21%, Bloomberg News has reported.
--With assistance from Chris Dolmetsch.
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