When hedge fund manager Scott Bessent, President Donald Trump’s Treasury secretary, left Soros Investment Management in 2015, he was able to raise $4.5 billion to make his new firm, Key Square Capital, one of the biggest hedge fund launches ever.
Markets have applauded the choice of Bessent for the cabinet post, but it’s not because Key Square has been a resounding success. By all accounts, Bessent had a stellar run as the Soros CIO for years, but by the end of 2023, his hedge fund had lost almost 90 percent of its assets from the peak: Assets had fallen to $577 million after reaching a height of around $5 billion, according to news reports and regulatory disclosures. Reuters reports that Key Square’s fund lost money in 2017, 2018, 2020, and 2021, although the past two years have been big winners, as was 2024.
Bessent is perhaps the most broadly popular of Trump’s cabinet appointees. But it’s unclear whether Key Square can survive his departure, as most hedge funds have a “key man” clause that allows investors to redeem under such circumstances. (Bessent declined to comment.)
But Bessent is not alone in finding that his pedigree and a supersize launch didn’t guarantee the fund would not lose investors over a spell of bad performance. At least two other hedge funds with multibillion-dollar launches eventually shut down, and the biggest-ever hedge fund launch is trailing its peers.
The largest launch that ended in a shutdown was Convexity Capital, the hedge fund firm started by former Harvard endowment chief Jack Meyer.
Meyer launched Convexity in 2005 to great fanfare, raising $6.3 billion in the largest hedge fund startup in history at that time. But he found that the success he had running Harvard’s endowment from 1990 to 2005, when it gained an average annualized return of 16.1 percent, didn’t translate to similar returns for his hedge fund. In 2019, when Meyer decided to close the fund, Convexity had been bleeding assets for years. It managed $14 billion at the beginning of 2014, but only $4.3 billion at the end of 2017, Institutional Investor previously reported.
The other superstar launch of that era was Eton Park Capital, founded by former Goldman Sachs partner Eric Mindich, the youngest-ever partner at the storied firm. When Mindich launched Eton Park in 2004 with $3.5 billion, his hedge fund was the biggest ever — only to be outdone by Meyer the following year. Eton Park eventually managed as much as $14 billion before losses led it to return all outside money in 2017.
Many hedge funds endured difficult times in the years following the financial crisis, and a number of prominent names shut down and became family offices, like Duquesne Capital, founded by Stanley Druckenmiller, another Soros alum; “big short” John Paulson’s eponymous Paulson & Co.; and Tiger Cub John Griffin’s Blue Ridge Capital.
Since then, a new generation of hedge fund talent has spawned some big launches, including former Millennium fixed-income chief Michael Gelband’s ExodusPoint Capital, which in 2018 became the largest-ever startup after raising more than $8 billion. However, the firm’s performance has largely trailed those of rivals, as II and others have reported. But it has nevertheless grown to $11 billion and was up 11.3 percent in 2024, according to someone familiar with the numbers. ExodusPoint declined to comment.
It’s too soon to see how big fund launches by other Millennium alums will do over time. Last year, Diego Megia, a former senior trader at Millennium, initially raised $5 billion for Taula Capital and later targeted $1 billion more, according to Bloomberg. Former Millennium executive Bobby Jain raised $5.3 billion for Jain Global, but it ended the year almost flat — up 0.5 percent since July. (Jain declined to comment.)
Another big launch came late in 2023 Todd Barker, the former head of Surveyor Capital at Citadel, raised $3.5 billion for Freestone Grove Partners.