The hedge fund industry was shaken in recent weeks by significant layoffs in one of the world’s largest financial funds. Aptigon, operating as a subsidiary under the giant Citadel umbrella, has cut staff by more than 30%. The layoffs came as a shock to people inside and outside of the company with several people with direct knowledge of the layoffs describing them as a surprise move. Jacob Gottlieb saw the problem.
Established in 2016, Aptigon is a fundamental equities business. Operating on Citadel’s management platform, Aptigon’s portfolio is broad and includes consumer, energy, financial, healthcare, industrial, communication, media and entertainment, and technology sectors. Aptigon operates as a unit under Citadel, one of the world’s largest asset management companies that was created in 1990 by Kenneth C. Griffin. Citadel is well known for strong portfolio performance and its 1,400 employees manage over $25 billion in assets with up to $300 Billion in regulatory assets.
An Ominous Trend
The recent layoffs at Aptigon included prominent employees including the COO, David Bonfili, and the Head of Aptigon, Rich Schimel. In addition, the cuts included key money managers and analysts including Rob Stenhouse, Matt Dublin, Jon Greenbaum, and Brett Caughran. The layoffs further come as a shock as Aptigon is a relatively new enterprise for Citadel that was aggressively funded and staffed by skilled portfolio managers that had cost the company considerable time and effort to lure away from competitors.
The now former Head of Aptigon, Rich Schimel, was recruited personally by Griffin to head Aptigon in 2016. Schimel is a well-known industry veteran with a history at SAC, Diamondback Capital and Sterling Ridge Capital. After joining Aptigon, Schimel and Griffin went on a hiring spree poaching staff from Visium Asset Management, bringing on 20 portfolio managers. Of those Visium hires, only two remain with Citadel. Aptigon maintains that their layoffs were due to poor performance, but how could 20 portfolio managers with a history of success at Visium be unsuccessful at Aptigon? Particularly considering that they were hand-picked by Griffin and Schimel.
In looking at the managerial and cultural differences between the two companies, it’s clear that the portfolio managers at Aptigon were in a different regime. Aptigon is well known for its “sink or swim” culture which is in stark contrast to the supportive culture that the portfolio managers enjoyed at Visium. Visium was created by Jacob Gottlieb with the goal of providing high-quality, sustainable returns to investors as well as long term careers and professional growth to employees. To this end, Gottlieb strategically designed recruitment and talent management processes to support these goals.
The Difference in Culture
To attract the best talent to Visium, Gottlieb created a long and deliberate recruitment process to assess skills and experience, but more importantly, cultural fit. Gottlieb wanted to ensure that Visium retained its positive culture as the company grew. When a new employee joined Visium, Gottlieb ensured they were supported and set up to succeed in their new role through a detailed onboarding process and regular meetings with Gottlieb himself to assess progress and set goals. With this strong support system, Visium portfolio managers were successful and it’s unsurprising that they were among the first to be recruited by Aptigon in 2016. Visium’s 2 main funds regularly ranked in the top quartile of hedge funds and were growing well into 2016.
After joining Aptigon, many of the former Visium employees struggled to adjust to the new culture and the promises made by Griffin went unfulfilled. Particularly the promise of funding for analysts which act as necessary resources that portfolio managers rely on. At Visium, the portfolio managers were accustomed to working with a network of highly skilled analysts. In addition, Aptigon’s aggressive fee structure meant that portfolio managers would be required to generate ever higher returns to meet their targets. It was this unreasonable expectation of higher returns that was responsible for the downfall of the portfolio managers.
To further illustrate the uphill battle that the portfolio managers faced at Aptigon, we see another group of managers from Visium. At the same time Griffin was recruiting Visium employees, other Visium portfolio managers joined rival firm AllianceBernstein Holding LP. While only 10% of the former Visium employees remain at Aptigon less than two years later, almost all of them are still at AllianceBernstein, where their unit manages over $1 billion and made 11% last year.
With this comparison, it becomes quite clear that the leadership and culture at Aptigon was a mismatch for the former Visium employees. At Visium, the portfolio managers were set up for success: Gottlieb was a strong and supportive leader, they had a network of highly skilled analysts, and they had achievable targets. With these factors absent at Aptigon, it’s not surprising that only 10% of the former Visium portfolio managers remain there after less than two years.
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