Millennium in trading deal talks with external hedge fund

investmentnews.com:

Izzy Englander’s Millennium Management is in discussions to invest billions of dollars with Schonfeld Strategic Advisers in a rare partnership deal between two industry heavyweights, according to people familiar with the matter.

Schonfeld, with about $13 billion of assets under management, would handle money for Millennium, which oversees about $60 billion, the people said. Spokespeople for the two New York-based multistrategy hedge fund firms declined to comment.

Investors have been flocking to multistrategy hedge fund firms like Millennium, Citadel and Schonfeld in recent years, in hopes that their pods of traders will help churn out consistent returns in increasingly volatile markets. Armed with billions of fresh money, they have been locked in a war for talent to continue to power returns.

An increasingly popular way for those funds to manage their soaring assets is to assign some capital to external hedge fund managers, primarily startups. Just over half of all multi-manager hedge funds now allocate to outside traders, according to Goldman Sachs Group Inc.

Millennium has given several billion dollars to hedge funds such as Delta Global Management and Lorenzo Rossi’s Kedalion Capital Management to manage. Such external arrangements make up less than a tenth of Millennium’s teams of traders, and many of the outside groups manage money exclusively for the firm, Bloomberg has previously reported.    

Still, such a heavyweight deal between two direct competitors marks a new frontier.

A potential partnership would allow Millennium to gain access to more than 100 investment teams at Schonfeld, which would remain independent and use the larger firm’s long-term capital to fuel its growth, the people said. Millennium itself