A new hedge fund has raised over $100 million and plans to use troves of data from other managers to select its investments.
Epsilon Asset Management plans to scrape decades of regulatory documents to analyze positions of other active managers and turn these into investment strategies for institutional clients, cofounder Faryan Amir-Ghassemi told Business Insider.
“We want to use very large data sets to understand the behaviors of what active managers do and how that correlates to future performance,” he said. “We analyze about $3 trillion in assets across 10,000 securities and a few thousand managers, and then derive from that which securities to invest in.”
Epsilon’s flagship “activist strategy” will be advised by a consortium of experts, the company says, including Richard Elden of Grosvenor Capital and Frank Meyer, of Citadel Investments. William Cline, CEO of Clovis Capital Management, provided an undisclosed amount of seed funding for the firm.
Amir-Ghassemi, who is 32, and his partners — Adam Lavin and Michael Perlow — first met while working for Novus Capital, a corporate advisory firm. The trio were using data and analysis to help companies develop investment strategies. Clients wanted the team to handle their investments outright, says Amir-Ghassemi, but they couldn’t because of conflict-of-interest rules.
So the team left their jobs earlier this year to found Epsilon. With their new venture, they hope to bridge the divide between active and passive investment strategies.
Active investors have come under fire in recent years for their high fees, but passive investors often struggle to beat benchmark indices, like the S&P 500. Amir-Ghassemi says his firm can deliver the returns of a hand-picked portfolio, with the lower fees and transparency of passive investing. He declined to specify the fees and the exact amount of capital raised.
“We think institutional investors will see the need for this because they’re having a hard time with hedge funds’ high fees, low transparency, and poor performance,” he said. “We have lower fees and better optics. If you own a managed account with us, you see every security you own.”
The fourth, yet-to-be-named partner is currently the chief operating officer of a “multi-billion-dollar hedge fund,” Amir-Ghassemi said.