(Bloomberg) — Millennium Management is in the process of taking back cash it gave to Engineers Gate to trade on its behalf, after the hedge funds agreed to end their more than three-year-old partnership.
Engineers Gate will stop managing money for Millennium by the end of this month, according to people with knowledge of the matter. The firms have mutually agreed to dissolve the separately-managed account, the people said, asking not to be identified because the details are private.
Engineers Gate wanted capital in the separate account to have the same liquidity terms as its fund, including quarterly withdrawals in normal markets and the possibility of investor-level gates in stress periods, one of the people said. The two firms entered into negotiations over whether to restructure the relationship but could not agree to those liquidity terms.
Engineers Gate’s hedge fund was up 50 basis points this month through March 20 and was down about 7% this year, one of the people said.
Millennium viewed Engineers Gate’s mandate as a $3.6 billion allocation that includes leverage, while Engineers Gate calculated the allocation at about $1.5 billion, reflecting different internal measures of the same relationship, the people said.
Engineers Gate is in the process of replacing Millennium’s capital and will start April with about $4 billion in assets in its hedge fund, the people added.
Representatives for the two multistrategy hedge fund firms declined to comment.
The decision marks the end of one of Millennium’s biggest partnerships with an external manager. The $86.7 billion investment giant has spent years spreading out its capital beyond its own traders, tasking money managers to run separate accounts, or even helping to spin out into new hedge fund firms.
Since its founding 12 years ago in New York, Engineers Gate has evolved from a small collection of equity-oriented quantitative strategies into a diversified investment platform.
Earlier this year, Millennium had topped up its investment in Engineers Gate by $300 million as part of the firm’s new capital raise.
