Tudor Investment Corp. is rebuilding its U.S. equity operation.
The firm recently named Larry Petrella, formerly a partner with Diamondback Capital Partners, director of U.S. equities. In addition, it hired Thomas Hayes, formerly with Citadel and MissionPoint Capital Partners.
This time around the $11.5 billion firm founded by Paul Tudor Jones II is taking a distinctly different approach than it did when Jim Pallotta headed up the long-short equity operation. From the time he joined the firm in 1993, Pallotta was the face of the equity operation, working from an office in Rowes Wharf in Boston, where he could be close to his family.
Pallotta was managing more than $9 billion — plus an additional $1 billion to $2 billion in Tudor BVI, the flagship multistrategy fund — when Tudor peaked at nearly $21 billion.
Raptor lost 7 percent in 2007 after being pressured to lower its exposure over the summer before its holdings had a chance to rebound. It dropped a further 21 percent in 2008. Despite having compounded better than 16 percent per year since its inception, Raptor saw investors yank out nearly $6 billion over two years.
At the end of 2008, Raptor was spun off from Tudor. And in June 2009, Pallotta shut it down altogether.
Since then, Tudor has not had a discretionary U.S. stock trading operation, figuring 2009 would be a good year for macro traders. However, late that year it began its recruiting efforts, resulting in the recent hirings of Petrella and Hayes.
Unlike in the past, no single manager will run the equity business, which will be based at Tudor’s Greenwich, Connecticut, headquarters. Rather, Tudor plans to hire individual sector specialists who will each manage a portion of Tudor BVI, the firm’s flagship fund. For example, Petrella specializes in tech, media and entertainment, and Hayes focuses on energy and utilities.
The firm hopes to have four to six sector portfolio managers in place over the next six to 12 months, including Petrella and Hayes, and eventually plans to have eight sector specialists.
Tudor is also talking to individuals with expertise in health care, consumer goods and basic industries such as metals and mining.
The idea is to have six to eight different revenue streams that will provide more diversification for Tudor’s multistrategy portfolio. Currently, discretionary and quantitative equity trading accounts for 12 to 13 percent of BVI’s portfolio. The goal is to lift this share to 20 percent in the short run.
But the portfolio will be completely liquid. There will be no investments in private companies, which makes sense given BVI’s quarterly redemption policy.
