The hedge fund Folger Hill was started by Sol Kumin,
one of Steve Cohen’s top lieutenants. Cohen is a legendary Wall
Street investor whose hedge fund firm, SAC Capital, was shut
down after an insider-trading investigation.
Folger Hill launched two years ago with high hopes and
big-name Wall Street backing.
The fund has struggled, losing money from Goldman Sachs
and UBS. It has been seeking an infusion of cash, which Kumin
is optimistic he can nab.
Folger Hill’s story highlights how difficult it can be
to launch a fund from scratch, even with top pedigree.
Sol Kumin launched his New York-based hedge fund in 2015 to much
With global expansion plans, he attracted the backing of big-name
Wall Street groups like Leucadia National Corp., which
encompasses the investment bank Jefferies Group, and Schonfeld
Strategic Advisors, which backed the hedge fund’s Asia unit.
Kumin, who had recruited some of Steve Cohen’s top traders while
working at the billionaire’s high-profile fund, SAC Capital, is
known for his boisterous personality and salesmanship.
But Kumin’s fund, Folger Hill Asset Management, has faced
setbacks. Though it has recently made slight gains, the fund,
which invests in stocks, is down approximately 20% since its
launch — while stocks were in a raging bull market. Last year,
assets dropped to a low of about $600 million from a peak of $1
billion earlier in the year.
The firm lost some of its big backers along the way, including
Goldman Sachs and UBS. In recent months,
several senior staffers have left. The pressure is now on to
find a strategic partner — a move that would give Folger Hill
Kumin, who has been hustling to find one since last year, says he
“We are highly encouraged by the level of interest we’ve received
to date and by the progress made with several prospective
partners,” he wrote in a
recent letter to investors that was reviewed by Business
That kind of partnership would boost assets in Folger Hill’s US
business and allow the firm to hire more traders with different
sector focuses, a person familiar with the matter said. It would
also mean the fund would sell a bit of itself, a common way for
startup hedge funds to raise money.
In exchange, Folger Hill is looking to raise $300 million to $400
million with a lockup of several years, the person said, adding
that the talks with potential partners were in advanced stages.
This article is based on interviews with people who spoke on
condition of anonymity so as not to harm professional
relationships or because the information they shared was private.
Other information was sourced from private documents, such as
marketing materials and investor letters, that were reviewed by
Folger Hill’s is a story of a vaunted hedge fund manager who left
the gate with negative returns — not uncommon, as many hedge
funds today struggle to post gains — and what can be done to turn
it all around. It also highlights
how difficult it can be to launch a hedge fund these days,
The stakes are high, and many funds don’t succeed. Last year,
Blackstone’s Senfina Advisors, another multimanager platform that
launched around the same time as Folger Hill,
closed after its performance dipped precipitously.
A star recruiter
Kumin knows the hedge fund industry well, having grown up at one
of the most successful — and notorious — funds on Wall Street.
Before starting his fund, Kumin spent nearly a decade working at
SAC Capital, a Connecticut hedge fund founded by Cohen, the
billionaire investor. Kumin helped raise money for the fund and
run the day-to-day operations so Cohen could focus on trading.
SAC was shut down after it pleaded guilty in 2013 to insider
trading, a story that has spawned pop culture depictions like the
TV series “Billions.”
Cohen and Kumin weren’t accused of wrongdoing. Cohen has since
turned his firm into a private investment office called Point72
Asset Management that manages his fortune.
Kumin didn’t manage money, but he recruited some of SAC’s star
talent, some of whom have gone on to launch vaunted funds. Those
recruits included Gabe Plotkin, who launched Melvin Capital, and
Aaron Cowen, who founded Suvretta Capital, according to people
familiar with the matter.
Among the many recruits was also Mathew Martoma, who in 2014 was
convicted of securities fraud and sentenced to nine years in
prison. Kumin had hired him in 2006 as an analyst, a fairly
junior position in hedge funds, a person with knowledge of the
matter said. Martoma later became a portfolio manager, a more
Those who know Kumin describe a boisterous, warm personality.
Kumin “has a taste for popsicle-hued polo shirts and had a
powerful charisma that drew comparisons to Bill Clinton,” the
journalist Sheelah Kolhatkar wrote in her recently released book
about SAC, “Black Edge.”
Kumin is also known for his love of expensive racehorses.
The Baltimore Sun profiled him last year as he watched one of
his horses win the Preakness Stakes, an elite race in Baltimore.
at the time of launch, was expected to build on the SAC
model, with Kumin working his vast network to find star talent.
He founded the fund with Todd Rapp, the former chief risk officer
at Highfields Capital Management.
Those who know Kumin say he is a born salesman and has worked
hard to build his venture.
“Sol will tell you everything is going great,” said one person
close to Folger Hill.
For investors, it has become a wait-and-see situation, one
adviser said. The person said that without that strategic
partner, investors, new or old, were unlikely to add capital to
the fund and were waiting to see what Leucadia, one of Folger
Hill’s main backers, would do.
Leucadia says it is fully committed to Folger Hill. The firm has
invested $400 million with Folger Hill, a person with knowledge
of the matter said. Leucadia, along with Schonfeld, committed
$500 million to the firm’s Asia business last year, and some of
that money has already been invested.
“We remain supportive of our partner Sol Kumin and Folger Hill,”
Leucadia said in a statement to Business Insider. “The business
has stabilized over the past few months, and we are pleased with
the momentum in Asia.”
Selling Folger Hill isn’t easy, people familiar with the matter
said. Though it has posted slight gains this year, since its
inception, the fund has only lost money while a bull market has
Some investors, meanwhile, have been questioning the pay model.
Folger Hill doesn’t charge a management fee in the way many other
hedge funds do. Rather, the firm uses a so-called pass-through
expense model, in which investors take on the costs of running
But withdrawals mean fewer investors are taking on the same
costs. A person familiar with the matter put those costs at 2%
the first year and slightly above that the second year the fund
was in operation.
The model is also set up in a way that investors, in addition to
paying the pass-through management expenses, pay performance fees
to individual portfolio managers at Folger Hill if they log a
gain — even if the overall fund is losing money. Performance fees
are anywhere from 10% to 20% of the gains, according to a
The person familiar with the firm said this setup helped retain
talent by allowing portfolio managers who post gains to get paid
even if their colleagues have lost money.
But that can seem unfair to investors, who are paying a lot of
money even as they rack up losses. One adviser to an investor
estimated they were paying about 4% to 5% of assets to have their
money at Folger Hill.
(A person with knowledge of the business disputed this figure and
said Folger Hill’s operating costs were about 2% and were raised
slightly last year, not accounting for “netting risk.”
Netting risk accounts for the pay investors give to managers
that perform well, even if the fund is down.)
In comparison, in a traditional two-and-twenty hedge fund model,
investors pay about 2% of assets and a 20% performance fee,
sometimes after a hurdle has been passed.
This pay system is not unique to Folger Hill. It’s de
rigueur at other multimanager hedge funds run by
billionaires, like the $26 billion Citadel and $35 billion
Millennium, and has
drawn criticism from investors.
And Folger Hill, in its latest investor letter, says it’s taking
measures to cut operational costs. Kumin said in the letter that
management staff had been cut by 17%.
There are bright spots, too. Two people close to the firm said
they were happy about the firm’s Asia business, which has posted
slight gains since it launched in November — about 3.1% net of
fees from November through March, according to a performance
document. The Asia unit feeds into the firm’s flagship fund.
Folger Hill is in expansion mode with its Asia unit and has hired
more portfolio managers, opening an office in Singapore. That
development furthered these two people’s bullishness on the
business. The Asia unit is also set up so that it is separate
from the US business and would be untouched if the American side
closed, the people said.
Still, Folger Hill has to compete with established funds that
have posted better performance and fresh startups that have a
There’s Brandon Haley’s Holocene Advisors, which
launched in New York this month with about $1.5 billion and
hired one of Folger Hill’s portfolio managers. As soon as
this year, Michael Gelband and Hyung Soon Lee, respectively the
former bond and equity chiefs at Millennium, are
expected to launch a large fund.
A person familiar with Folger Hill said they didn’t worry about
“If you perform, dollars will come,” this person said, adding
they were hopeful about Folger Hill’s recent slight uptick in
performance and what they described as a stable investor base.
Folger Hill has retained key institutional investors, such as
endowments, and Leucadia’s and Schonfeld’s money is locked up,
the person said.
Kumin has acknowledged the need to do better, and in his latest
letter, he detailed ways the firm was improving.
“Throughout the quarter, we made a number of adjustments to our
allocations across portfolio managers, individual sectors and
geographic areas which have increased portfolio diversification
and reduced the overall volatility of the funds,” Kumin wrote.
“Looking ahead, we will continue to be vigilant monitoring our PM
teams’ risk exposures and dynamic in our capital allocation
approach with the intention of producing a lower volatility
return stream,” he added.
One of the people familiar with the firm said they were hopeful
about the firm’s 1.2% gain in the first quarter of this year.
They also said Folger Hill was deep in discussions with potential
The firm is “finally starting to turn,” the person said, adding
that the firm had hundreds of millions in locked-up capital.
Folger Hill now manages about $750 million to $800 million, with
an additional $200 million that has been committed from Leucadia
and Schonfeld, the person said.
In the investor letter, Kumin said he would have more details to
share about a prospective investor before June.
In closing, he wrote: “Despite the challenges we have faced over
the past two years, our conviction that the multi-manager model
of sector-focused, fundamental long/short equity investing,
coupled with a well-defined and independent risk management, is a
prudent and proven strategy to generate high-quality
risk-adjusted returns over the long term.”