The ex-Citi & Goldman Sachs traders of whom hedge fund Millennium will (probably) never let go
Millennium Management, the multistrategy hedge fund run by Izzy Englander, is not known for its tolerance of drawdowns. And yet two senior portfolio managers at the fund have been repeatedly associated with large losses, yet retained their seats.
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One of them is 39 year-old Pratik Pratap Madhvani, a trader who once worked at Citi and who is thought to run one of Millennium's largest pods, but whose name has been associated with big drawdowns twice in the past year. Madhavani is based in Dubai; Millennium is thought to have opened its office there in part to accommodate him when he joined from prop trading firm Tibra in 2020. Madhavani's team is now thought to comprise over 20 people.
The other is Glen Scheinberg, a Puerto Rico-based 38 year-old ex-Goldman Sachs vice president, who joined Millennium in 2014 and who runs a more established pod called SRBL. Scheinberg's pod includes Michael Rems, James Brophy and Richard Li, who joined with him from Goldman Sachs, plus over 20 others.
Business Insider reported yesterday that these two pods run by Madhvani and Glen Scheinberg were down "hundreds of millions" at one point last month and that this contributed to Millennium's low 0.5% return for November overall. Earlier this year, Bloomberg reported that the same two pods run by Madhvani and Scheinberg were down $900m in the three months to March.
Madhvani and Scheinberg follow index-rebalancing strategies, which aim to benefit as passive funds alter the weighting of stocks included in indices. Giuseppe Paleologo, the head of quant research at Balyasny provided an explanation of how the strategy works here. It can be risky. Last month, Business Insider says funds were caught out by the unexpected reconstitution of MSCI's indices.
In normal circumstances, Millennium has limited risk tolerance. The fund declined to comment for this article, but the Wall Street Journal reported earlier this year that Millennium portfolio managers who lose 5% of the capital allocated to them typically have their capital halved. If they lose another 2.5%, they're usually fired.
After the March drawdown, Hong Kong-based portfolio manager Jeremy Ma left Millennium. Ma, who spent three years at the fund, recently resurfaced at Hong Kong based Ovata Capital. But Madhvani and Scheinberg are still there. And there they are likely to say.
The two men are understood to be among Millennium's top performers. During their tenure, it's thought that they've generated billions in profits for the firm. Business Insider reported previously that Scheinberg's pod generated $3bn throughout 2020 and $2bn in the first three quarters of 2021. Insiders suggest that Madhvani has generated at least $1.5bn in profits since he joined five years ago.
The size of their occasional losses implies that the two men are managing multibillion pools of capital for Millennium, or that the fund is more tolerant of drawdowns in light of their track record.
Either way, Madhvani and Scheinberg's pods are understood to be particularly popular among potential recruits. "No one turns Pratik down," says one. Scheinberg has become inordinately wealthy from the risky rebalancing trades: in 2022 he purchased a $37m house in Dorado Beach East, a Puerto Rican resort popular with celebrities.
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