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The Magnetar Capital founder talks about how investors are shaping innovation in the hedge fund industry -- and how a yearning for constant improvement has shaped his firm's culture.
Magnetar Capital
There are eclectic investors. And then there's Magnetar Capital. The Evanston, Illinois-based, $14.75 billion firm, founded ten years ago by former Citadel global equity chief Alec Litowitz and co-founded by Glenwood Capital Investments president Ross Laser, focuses on three major areas: event-driven, fixed income and energy. Its individual investments range from financing aircraft to installing solar panels across the U.K. to, most famously, implementing an arbitrage strategy with collateralized debt obligations tied to mortgages.
Litowitz and his partners -- including David Snyderman, who heads the fixed-income group, and Eric Scheyer, who oversees energy -- have a reputation for seeking out investment opportunities that other firms may deem too complex and exploiting them in innovative ways. Sourcing such deals is not easy, but then, Litowitz has never been drawn to the path of least resistance. Born and raised in the suburbs of Chicago, he earned a dual MBA/JD degree from the University of Chicago and eventually joined Citadel, reporting directly to the hedge fund firm's legendarily demanding founder, Kenneth Griffin. Before starting Magnetar, Litowitz spent two years competing in grueling Ironman triathlons; last year he completed a notoriously difficult mountain bike race in Costa Rica. Litowitz's relentless quest for self-improvement and his strong aversion to the status quo are partly what drove him, along with his partners, to sell a stake in their firm to Blackstone Group in May. He says the deal will, among other things, help him motivate his employees, ultimately inspiring them to find even more innovative ways to invest.
Institutional Investor's Alpha: What do you do to encourage innovative thinking at Magnetar?
Litowitz: That's a by-product of the DNA of the firm. A lot of people would say it's a bit tied to my personality -- I have a fairly high dissatisfaction with the status quo, and I believe that it is easy for something to become obsolete and stale. So I think the answer to that is that it's drilled in.
"Since the beginning we have structured our businesses to remove the barriers that often exist among various styles...