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Riptide Advisors, a new multi-strategy hedge fund, plans to hire unproven talent as portfolio managers.
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Young PMs who succeed will get more capital and a path to starting their own company.
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Tyler Errickson, the company’s founder, said he envisions the fund as the minor leagues of the industry.
Tyler Errickson doesn’t plan to compete with the biggest firms in the $5 trillion hedge fund industry; hopes to help them.
Riptide Advisors, Errickson’s new multi-manager firm set to begin trading on January 1, was created to address the industry’s biggest challenge: the shortage of talented and experienced portfolio managers.
The new manager’s approach, Errickson said, is to be “basically a seeding vehicle” that will allow unproven but promising talent (think an analyst at a large firm like Millennium who has never run a book on his own) to manage small portfolios of up to $20 million with the goal of adding capital and responsibilities over time by moving to the firm’s larger funds.
“We’re almost a farm league for your major league teams,” he said.
While companies focused on generating new launches have been around for decades, Errickson’s focus on training young investing talent to learn how to operate in a multi-strategy structure is unique. It’s another example of the knock-on effects of the dominance of the biggest players, namely Millennium, Citadel, Point72 and Balyasny, which have exploded in size and gobbled up talent.
As Business Insider previously wrote, a cottage industry of consultants and advisors focused on helping investment talent navigate working or being hired by these types of hedge funds is emerging.
In Riptide, young PMs will need to demonstrate their ability to manage a portfolio and make money within a strict risk system; The company is using Arcana’s risk management platform, designed by former Citadel PM Rich Falk-Wallace. Riptide will then connect them with allocators in their network who are interested in supporting them through a separately managed account or allow them to continue operating within the company.
Riptide’s premiers will be able to own their records and won’t have non-compete periods to sit out, Errickson said, so he expects the biggest companies to loot a lot too, a reality he not only understands, but is embracing.
“These funds are awash with capital. Talent is what we’re all trying to solve,” said Errickson, who is also chief investment officer at Lodestone Global, an outsourced investment platform for family offices that is providing capital for the startup.