(Bloomberg) -- Izzy Englander’s Millennium Management aimed to raise as much as $10 billion of new capital for its hedge fund. It turns out investors wanted to fork over twice that amount.
Despite the $20 billion of demand for the fund, the firm told clients it will hold to its initial cap, according to people familiar with the latest money-raising efforts.
A spokesperson for the hedge fund, which manages $69.5 billion, declined to comment.
The firm is taking advantage of the popularity of its brand of multimanager, multistrategy investing that produces steady returns and historically makes money whether markets rise or fall.
Since its founding in 1989, Millennium has had only one money-losing year — in 2008, the year of the financial crisis, when it dropped about 3%. This year, the fund is up 9.5% through September.
With Millennium’s most recent money raise, clients pledged to hand over cash the firm can tap over time. As Millennium deploys the funds, new commitments will replenish the pool. When Millennium taps capital, everyone in the queue will participate — though the firm will take more money from investors who made the earliest commitments.
Millennium can call the new pledges as early as January.
With this new type of fundraising, Millennium can access liquidity when it needs to — and it can avoid holding a cash cushion that could weigh on returns.
Millennium’s plan also takes some uncertainty out of money raising. Currently, if the firm doesn’t use all of its callable capital within three years, the client pledges are voided. While these latest commitments will no longer expire, investors will have the option of gradually reducing them after two years.
Millennium and its peers see more-stable capital as key to attracting and retaining investment talent. Millennium investors can withdraw only 5% each quarter, extending the full redemption period to five years.
Unlike Millennium, some of its largest competitors have sought to slow their growth by returning profits. Ken Griffin’s Citadel routinely gives back money it has made, and Steve Cohen’s Point72 Asset Management is considering a plan to return billions to clients at year-end — the first time it has made such a move.
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