(Bloomberg) -- A new hedge fund is shunning pricey portfolio managers by recruiting only analysts to run money and replicate returns generated by some of its largest peers but at a lower cost.

Taproot Management has won backing from Jason Beverage, former chief investment officer of Two Sigma Advisers, to do so, according to a person with knowledge of the matter. Taproot’s founder, David Lin, who previously worked as an analyst at Millennium Management-backed Tamridge Capital and Larry Robbins’ Glenview Capital, expects to start the fund with about $500 million next year, the person said, asking not to be identified because the information is private.

Beverage and a Taproot representative both declined to comment.

The hedge fund is putting together a multi-analyst team of eight to invest across health-care, industrial, technology, consumer and financial-sector stocks. They will generate investment ideas and construct portfolios, and then feed that into a proprietary technology platform designed to optimize their bets that the firm hopes could generate returns similar to popular multistrategy hedge funds.

Taproot is trying to break into the hottest part of the hedge fund industry, dominated by the likes of Millennium and Citadel, where teams of traders bet across asset classes to produce steady returns. Their success in doing so has flooded them with more cash than they could manage, attracted a cohort of new players and sparked an expensive war for talent.

Startups are finding it tough to compete with them for talent and are having to differentiate themselves to win capital. 

Beverage, Taproot’s backer, worked at Two Sigma for two decades and was most recently managing director for research there, according to his LinkedIn profile. At the firm, he helped expand alpha capture research, a strategy that involves betting on investment ideas contributed by a range of analysts or portfolio managers.

Taproot is hiring senior analysts with six to 12 years of experience. Analysts will get high-single-digit percentage cuts from the profits they generate — less than half of the typical payout to portfolio managers at larger firms. They may have portable track records they can take with them after three years, should they chose to leave, the person said.

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