|| Late Traxis founder Barton Biggs. Photo: (Bloomberg News)|
Traxis Partners apparently could not survive the death of its founder, Barton Biggs.
The Greenwich, Connecticut–based hedge fund firm disclosed Wednesday that it has liquidated all of its funds for which it was the investment adviser and is winding down its operations.
Traxis’ closure is another reminder that it is difficult for a hedge fund firm to outlive the founder when his name is on the door and its investment strategy is identified with that individual.
Biggs, a fitness buff, died suddenly in July 2012 of a staph infection shortly before a planned climb to Machu Picchu, the ancient Inca city in the mountains of Peru. Amer Bisat, a managing partner at Traxis, was confident at the time that the hedge fund firm founded by Biggs in 2003 would successfully transition to a new management team.
At the time, Bisat, Biggs’s heir apparent, had been quietly playing a major role at the then-$1.3 billion firm, accompanying Biggs to investor meetings, managing the research effort and overseeing the firm’s finances for a year and half before the founder’s unexpected death. As far as Bisat was concerned, Traxis could seamlessly execute a successful succession plan.
But he had a major hurdle to vault. Traxis was still clearly identified with Biggs, the former Morgan Stanley market strategist who was a brilliant predictor of major market events. Biggs correctly called the growth of emerging markets like China before U.S. businesses flocked there, and he telegraphed the collapse of the technology bubble years before it happened.
As a 30-year money manager, Biggs was widely respected on Wall Street for his macro skills. It was Biggs who had the longtime relationships with investors who entrusted their money to him year after year.
Sure enough, earlier this year we reported that Traxis’ assets had fallen below $400 million, down more than 70 percent at the time of Biggs’s death. Investors had apparently decided that Traxis without Biggs was just another among the thousands of small hedge fund firms.
The firm’s demise is yet another lesson for hedge fund superstars who want their firms to outlive them. They must groom an obvious successor who is made known to their investors as well as to the outside world.
It is not easy. Few firms have pulled this off. Over the years Highbridge Capital Management has been able to survive the departure of one of its co-founders, Henry Swieca, partly because the other founder, Glenn Dubin, continued to the run the firm after it was acquired by J.P. Morgan Asset Management. Dubin and Swieca also were not the ones pulling the trigger on individual investments every single year.
Multistrategy firm D.E. Shaw & Co. has long thrived after founder David Shaw moved on to his other interests. And now Caxton Associates is having its best year in nearly a decade under Andrew Law, who took control of the firm at the beginning of 2012 after founder Bruce Kovner retired.