Jim Pallotta, Paul Tudor Jones II’s one-time equity specialist, is quietly plotting his comeback.
The 52 year-old has raised about $200 million in the past two months or so for a new long-short equity fund, called Evolution.
Pallotta’s goal is somewhat modest. He is looking to raise $1.25 billion to $1.5 billion, a fraction of the $11 billion or so he once ran for Jones when Pallotta accounted for roughly two-thirds of Tudor Investment’s total assets.
Pallota spent 16 years at Tudor. From Oct. 1, 1993 through May 31, 2009, his Raptor Global Funds compounded at nearly 14 percent per year, compared with roughly 6.5 percent for the S&P 500. Including the seven years he spent running a hedge fund at Boston money-management firm Essex Financial, Pallotta has compounded at nearly 20 percent per year.
However, after losing 8 percent in 2007, investors pulled out about $1 billion. In 2008, they yanked another $5 billion or so when he finished down 20 percent.
Jones, a commodities and trend following expert, was never comfortable in the equities world, although he trusted Boston native Pallotta enough to let him work from an office at Rowes Wharf in Boston, about 150 miles from Tudor Investment’s Greenwich, Connecticut offices. They clashed when Jones persuaded Pallotta — a long-short equity specialist — to increase cash and reduce his exposure in 2008.
In August of 2008 they jointly announced Pallotta would leave. By June 2009 Pallotta — who bears no animosity for Jones — completely wound down Raptor’s operations.
Today, Pallotta also manages $400 to $500 million of private investments in a side pocket created from his Tudor days, for which he charges no management or performance fee even though he spends money from his own pocket on two people who work on the portfolio full time.
Pallotta, a part owner of the Boston Celtics, which is currently in the NBA finals, had hoped to start his new fund earlier this year, but tabled his plans when his father became very ill late last year, succumbing in January after a battle with pulmonary fibrosis.
Evolution will have a one-year lock-up with three months notice to redeem. Eventually, he also would like to seed other hedge funds.
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
