French hedge fund Capital Fund Management, which fosters an open, academic-inspired culture, is governed by a five-member board.Stefanía Iemmi; Courtesy of Capital Fund Management
Equity fund management has been on a good run in recent years, growing amid strong returns.
The firm fosters an open, malleable culture that appeals to Ph.D.s but differs from many peers.
It’s not hypersecret. Does not hire PM armies. And he’s not obsessed with winning at all costs.
In recent years, multi-strategy hedge funds have been booming, absorbing hundreds of billions in investor assets and seeing their staff numbers soar.
A dilemma these companies face: how to maintain a coherent company culture in the face of a period of accelerated growth?
The answer, says Philippe Jordan, president of the French hedge fund giant: not so.
Culture is often mythologized, but in Jordan’s view it is essentially the simple byproduct of shared past experiences, and he warns against the impulse to glorify “the good old days.”
“Nostalgia turns a culture into an artifact, and our culture is dynamic,” Jordan told Business Insider in an interview.
CFM, a multi-strategy quantitative fund based in Paris, has seen its own growth. Assets rose about 25% from the beginning of this year to $21 billion in September. Five years ago, the company managed only $6.5 billion.
The number of employees has also increased, from 260 employees at the end of 2020 to almost 450 today. The CFM’s New York office has doubled in size in recent years to 40 people, including 15 researchers.
The 35-year-old company doesn’t fit neatly into the hedge fund typology and rejects many of the norms that have come to define the industry. CFM does not have an extraordinary founder who reigns supreme; instead, it is governed by a five-member board. It does not hire armies of independent portfolio managers. Unlike most of its quantitative brethren, it is not obsessed with secrecy. And it doesn’t adopt a ruthless zero-sum mentality.
Compared to the multimanagers that dominate the current hedge fund landscape, which employ dozens of siled groups, CFM is “on the other end of the spectrum,” Jordan said. “A lot of collaboration, open environments where people feel free to communicate, talk and be curious about other people’s businesses.”
CFM was one of the first to apply the academic and collegiate ethics model that is now common in many quantitative trading firms. Co-founder Jean-Pierre Aguillar, an engineer and computer scientist, launched CFM in 1991 and helped define the company’s culture before his death in a flight accident in 2009.
While collaboration and intellectual rigor are valued, the firm is not “throwing spaghetti at the walls.” Performance matters, as evidenced by CFM’s strong performance in recent years.
“We want to win, but not at the cost of having a work environment that is not sustainable,” Jordan added.
That balance has helped CFM maintain its edge and attract top talent, even as the industry changes course.
CFM’s investment engine is not driven by traders but by academics. Most recruits enter directly after PhD programs (usually in physics) and learn finance on the job.
The company has around 100 researchers and aims to hire 15 new doctors per year.
“We are very good at hiring people with formal scientific training,” Jordan says.
Part of the appeal is the feeling of never having left academia, despite working at a hedge fund. Most hedge funds avoid the spotlight, courting top mathematicians and scientists with the understanding that financial riches are the compensation for working in obscurity. The investigations are treated as state secrets.
Not so at the CFM, where researchers, including president and chief scientist Jean-Philippe Bouchaud, a theoretical physicist, regularly publish academic papers.
CFM is not alone (companies like DE Shaw and AQR also publish, to name two) and it is certainly not giving away valuable trading signals. But from its ranks have emerged hundreds of white papers on topics including market microstructure, execution costs and factor accumulation. Researchers typically present their work in weekly seminar-style meetings, much like those at a university.
“You can be at CFM, be part of a group that solves problems for investors and make money, but they also publish and have a life as a researcher,” he said.
That combination of intellectual freedom and financial advantages is a trap for the objectives of the CFM doctors.
As CFM has grown in recent years, it has added more experienced hires with a decade or more of experience in the field. Some companies codify culture into rules or “principles” that employees are expected to absorb and emulate.
CFM takes the opposite view: newcomers must respect the company’s collaborative spirit, but are also expected to inject new ideas and entrepreneurial enthusiasm.
“Turning people into CFM clones is not a good idea,” he said. “We bring those people in because they know things we don’t know and they’re exposed to cultures we don’t know.”
The strategy has been working. Retention remains high, Jordan says, in an industry famous for burnout and attrition, with many researchers staying for close to a decade. (CFM declined to provide specific attrition figures.)
That doesn’t mean recruiting has always been a piece of cake. In recent years, CFM has had to adapt to a flood of new competition as Paris has evolved from an exporter of quantitative talent to a full-fledged hedge fund hub. The city has long produced elite mathematical minds – a legacy of its rationalist tradition shaped by figures such as René Descartes and Napoleon’s educational reforms – but for decades, many of those few left for New York or London.
That dynamic has changed. Paris has experienced a quiet quantitative renaissance, with firms like Squarepoint and Qube Research building major presences in the city, and American heavyweights like Point72’s Cubist group and Citadel also expanding. Competition now spans all functions, not just investment research but also human resources, technology and operations.
“The fact that two world-class peers emerged in Paris created competition across the company that we weren’t used to,” Jordan said. “But that’s not bad because it sharpens you and creates a pool of talent also in the city that didn’t exist before.”
No amount of cultural hygiene or philosophical purity matters if a hedge fund doesn’t make money.
And CFM has been on a roll, with its flagship Stratus fund, now closed to new investors, earning double digits over the past three years. Last month, it returned $2 billion to investors in an effort to preserve performance.
CFM has moved larger strategies from the “main battleship” to new standalone funds. The Cumulus fund was launched two years ago and is approaching $2 billion in assets.
CFM understands that this success is a direct result of its philosophies that go against industry norms. Could you take a more ruthless approach and maximize profits? Not without sacrificing long-term performance.
“We have developed this culture over time and believe it is the best way to improve our understanding of the markets and sustainably achieve superior investment performance,” Jordan said.
