Hedge fund Marshall Wace has hired an executive from its private equity backer KKR to run its US business.
Todd Builione, a partner and global head of private wealth at KKR in New York, will join Marshall Wace in September as head of North America, the firms said on Monday. He succeeds Michael Sargent, who will retire in January after nearly 20 years with the company.
Marshall Wace was founded in 1997 by Paul Marshall and Ian Wace and has grown to become one of the world’s leading hedge funds. It is best known for its Tops Market Neutral fund and its flagship Eureka fund run by Marshall, which analyzes buy and sell recommendations from around 1,000 outside analysts. About half of its assets are system strategies that use computer algorithms.
KKR purchased a 24.9% stake in Marshall Wace in September 2015. It paid for the shares using its 7.4 million shares, worth $147 million at the time, and an undisclosed amount in cash on its balance sheet. KKR has since increased its stake to 39.9%. During that roughly eight-year period, Marshall Wace’s assets under management nearly tripled, from $22 billion to $62 billion.
The growth of groups such as Marshall Wace illustrates how the hedge fund industry has become increasingly concentrated in a small number of large, diversified businesses. Rising costs of technology and regulatory investments raise the barriers to entry for new players.
Builione is already on the board of Marshall Wace through a strategic partnership with KKR. He ran the hedge fund business at Highbridge Capital Management and worked at Goldman Sachs before joining the alternative investment giant a decade ago.
The management change at Marshall Wace’s North American operations will not result in a change to its distribution strategy. Most of its clients are institutional investors and the company has no plans to enter the retail market, a person familiar with the matter said.
Most of its funds are closed or partially closed for new funds. About three-fifths of hedge fund assets worldwide are held by U.S. investors, according to data provider Preqin.
Eureka has had a mediocre performance this year, but it has averaged annualized gains of 8.3 percent since its launch nearly 20 years ago, according to investors. The Tops Market Neutral fund is up 2.88 percent this year and has averaged an annualized return of 9.31 percent since its inception in November 2007.
KKR manages more than $500 billion in corporate private equity investments and strategies focused on lending, infrastructure and real estate.