Ex-Citadel duo raise $1.85 billion for hedge fund

Former Citadel traders Jonas Diedrich and Dave Sutton have exceeded the capital raise target for their hedge fund, making it the biggest startup of the year.

London-based Ilex Capital Partners started trading with client assets of $1.85 billion on July 1, said a person familiar with the matter. The firm is adding a couple of hundred million more in capital this month and will stop accepting money Aug. 1, the person said, asking not to be identified because the details are private.

Demand for the equity long-short hedge fund stands in stark contrast to the tough capital-raising environment. More than 2,500 hedge funds have shuttered over the past five years, exceeding launches during the period, according to data compiled by Hedge Fund Research Inc. 

Ilex joins a small group of fund managers able to start with more than $1 billion in assets as investors migrate toward the largest players, especially those focused on combining multiple trading strategies to produce diversified and stable returns. The fundraising beats Mala Gaonkar’s SurgoCap Partners, which launched in January with $1.8 billion. 

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Diedrich and Sutton previously expected to raise about $1.7 billion from investors, including $500 million from Woodline Partners to trade for their equity market neutral strategy, Bloomberg reported in April.

Their success shows that some fund managers are able to lure investors even to equity strategies that have seen persistent outflows. Equity long-short and market-neutral hedge funds have collectively seen outflows of more than $14 billion this year, the biggest among peers, according to data compiled by eVestment.  

Diedrich is chief investment officer, while Sutton is head of trading. They are joined by former Bank of America Corp. executive Ashley Jarvis as COO and Fabian Blohm, also a former Citadel executive, as chief risk officer. The four make up the management committee for a team of about 20 people. 

The firm will open to new capital after it hires a new team, the person said.