Philip N. Duff, founder of hedge fund FrontPoint Partners LLC, is struggling to attract assets for his latest money-management venture. More than half of his three dozen employees have left or been cut, according to two people with knowledge of the company.
Massif Partners, launched last year, has been trying unsuccessfully to raise money from pension funds, endowments and foundations, said the people, who asked not to be named because the information is private.
Jim Creighton, founder of Creighton Capital Management, and his five-person team departed in March, Creighton said in a telephone interview. Massif’s website showed that the firm had 35 employees in March. The Greenwich, Connecticut-based firm has just 15 today, including Duff.
“Creighton Capital is no longer affiliated with Massif,” Creighton said in a telephone interview.
Massif is Duff’s third venture in 12 years, and the second firm he’s founded that has set up offices, hired dozens of workers, then had difficulty raising money. At Massif, Duff and a group of partners put up about $20 million to hire employees, buy equipment and rent office space, one of the people familiar with Massif said. Duff, who profited from the $400 million sale of FrontPoint to Morgan Stanley in 2006, has been covering Massif’s payroll himself since February, when the seed money ran out, one of the people said.
Massif planned to put institutional clients in a wide range of investments, including low-cost exchange-traded funds and an in-house group of hedge funds. Massif has given up on raising money for the hedge funds or even eventually offering them to clients, the people said.
Duff, 55, declined to comment.
He started Massif last year in Greenwich, where he lives. Like FrontPoint, the name comes from one of Duff’s pastimes: Mountaineering. A massif is the backbone of a mountain range. Front-pointing means to climb a steep glacier using the toe-end tips of one’s crampons.
Massif is still trying to market its money-management services to about 50 pension funds, insurance companies, endowments and foundations, according to the people.
It is selling something called liability-driven investing, where, for example, a pension fund matches its future payment obligations to retirees with investments that can make up for shortfalls and then preserve capital. That approach differs from traditional money managers, who tend to focus on achieving a specific level of returns. BlackRock Inc., Pacific Investment Management Co. and other firms are offering similar products.
Pension Fund Bargain
Massif plans to charge no more than 50 basis points, or 0.50 percent, of assets under management. That’s about half of what pension funds now pay for traditional managers. It’s also far less than what most hedge funds charge: 2 percent of assets as a fee, plus 20 percent of any profits.
The in-house hedge funds were supposed to support Massif by managing money for a range of clients while the lower-margin pension business got off the ground.
Rather than round up smaller clients, Duff hoped to get one large one to commit several hundred million dollars, the two people with knowledge of the company said. The strategy had worked at FrontPoint. XL Capital Ltd., the insurer now called XL Group Plc., hired FrontPoint to manage $500 million in 2001, shortly after FrontPoint started.
Duff made his name with FrontPoint, which he started in 2000. At its peak in 2005, FrontPoint managed $6.3 billion and made $70 million in profit, according to an internal document. Duff sold it to Morgan Stanley (MS:US) for $400 million in 2006.
His second company, Duff Capital Advisors LP, was going to be a one-stop shop for pension funds looking to boost returns and diversify their holdings. Duff planned to vet each manager and monitor the risks each took.
Duff Capital had a sterling start. It raised $100 million from New York buyout firm Lindsay Goldberg LLC just to get set up and hire workers. Duff used the money to lease 43,400 square feet (4,030 square meters) of office space in downtown Greenwich for $5.5 million a year, according to a person familiar with the matter. He installed a custom food court and a skylight that adjusted to bright sunlight to keep traders from squinting at their computer screens.
At its peak, Duff Capital had more than 100 employees. Then, in 2008, credit markets froze, stock markets swooned, and Duff couldn’t raise money. The firm closed in 2009, having never moved into its new office.
Undaunted, Duff started Massif in 2011. Nowhere on the Massif Partners website does the company mention Duff Capital, not even on Phil Duff’s own biography page.
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