S. Donald Sussman’s Paloma Partners Backs New Fund

January 13, 2014   Stephen Taub

The firm, which invests in emerging managers, has made a new allocation to London-based Rhodium Capital.

   S. Donald Sussman (Bloomberg)

Paloma Partners has made a new commitment to back a fledgling hedge fund.

The Greenwich, Connecticut–based firm, founded in 1981 by S. Donald Sussman, has agreed to back Rhodium Capital, a long-short European credit focused fund founded late last year by Iftikhar Ali and Jeffrey Tirman. The London-based fund is said to take a fundamental and relative value approach.

Paloma is known for backing emerging hedge funds, which then exclusively work for Paloma. Last year Alpha named Sussman to its Hedge Fund Hall of Fame.

Ali, who serves as chief investment officer, has more than 20 years experience in the corporate credit area, most recently at Observatory Capital. He previously worked at Israel Englander’s Millennium Management. He is also a former head of international proprietary trading at Bank of America in London. Tirman, who serves as chief executive officer and chief risk officer, was the founder and portfolio manager of Switzerland-based Talisman Capital.

Rhodium, which will continue to be based in London, will manage money for Paloma in a managed account structure. Paloma currently has more than 20 trading teams.

Sussman is a pioneer in the hedge fund industry. He was among the first to identify and then farm out money to unknown managers rather than invest the capital himself. Eventually, Sussman moved away from investing in outside managers to hiring undiscovered managers to trade on Paloma’s centralized platform. The approach has worked well. From October 1981 through July 2013, Paloma Partners, which manages about $2 billion, produced an annualized return of nearly 13 percent. It gained nearly 16 percent last year.

Over the years, Sussman has been credited with making early investments in some of the industry’s most legendary firms. These include David Shaw’s D.E. Shaw, Bruce Kovner’s Caxton Associates, Edward Thorp’s Princeton/Newport Partners, Paul Singer’s Elliott Management Corp., Alan Slifka’s Halcyon Asset Management and John Angelo and Michael Gordon’s Angelo, Gordon & Co.

"Our managers are still independent, but these days we require full position transparency, immediate liquidity, approval rights over the selection of prime brokers and counterparties and so forth," Sussman told Alpha last summer.

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