Bobby Jain suggests investors & portfolio managers at his hedge fund need patience

When we suggested yesterday that hedge fund Jain Global's teething problems might one day disappear in the way that ExodusPoint's have done, we didn't know that Jain Global founder Bobby Jain had given a long and meandering interview on the fund's evolution two days previously. Jain's message is effectively, "patience." 

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This needs to be reinforced, because for the moment some headhunters inform us that Jain's portfolio managers appear open to taking their calls. "It's very easy to get into conversations with them," one headhunter tells us, speaking anonymously. "They don't desperately want to move but they're frustrated." Other recruiters echo this. Morgan Stanley's ex-head of European credit trading left earlier this month for reasons unknown.

Jain Global has so far produced only weak returns. The fund only began trading in July 2024, and generated half year returns of 0.5%. Last year, it generated returns of 3.7%. When portfolio managers are paid 20% of their pnl, this matters. It doesn't help that assets under management per employee at Jain Global are also low compared to Schonfeld or ExodusPoint (but are on a par with Millennium and Balyasny).  

However, as we noted yesterday, things could change. ExodusPoint also generated poor returns for a few years following its inception; last year, it was one of the industry's top performers.

Speaking on the Capital Allocators podcast, Bobby Jain said that Jain Global has been carefully constructed so that it can easily scale. While most funds launch with a focus on one or two strategies, Jain Global launched with seven. These are and were: fundamental, quantitative and arbitrage in the equities business; rates, macro and credit in fixed income; plus Asia, which Jain says covers Korea, China, onshore, offshore China, Japan, India, and is a strand of its own. This makes it easier to grow. You're starting off as "seven-legged stool," not adding legs as you go along.

Jain Global has also invested heavily in its own infrastructure. Jain said the fund was assisted in this by AI, which meant it didn't have to hire "hundreds of technology people." While rival hedge funds are dealing with the nightmares of legacy code, Jain said his fund has a tech stack that's fresh and new. This is a huge advantage. Jain said the head of a rival fund informed him that he too often wants to start from scratch, but is beleaguered by "legacy systems...legacy architecture, legacy people, legacy processes, legacy mindsets."

As Jain Global gets going, its founder therefore insists that his fund is primed to thrive. "You're going to see the operating leverage start kicking in because we think we can get to two, three times the size without having to hire that many more people." This would be good news for investors, and for current employees. 

Jain Global launched with $5.3bn in Capital and Bobby Jain told the podcast it took 15-18 months to deploy it. "Now you have a little bit of scarcity of capital," he added, meaning that its portfolio managers are competing for existing allocations. Singapore's GIC is pulling $250m from the fund, but rivals suggest Jain could yet benefit from investors' appetite for allocating money to hedge funds while rivals like Citadel are returning money to investors. 

It appears to be a chicken and egg situation, however. In January this year, Jain Global lost 0.9% and last year's returns were diluted by around $500m of costs relating to 'front loaded' expenses, which could put investors off. Jain says front-loaded costs are all part of the plan, though. "One of the things my dad said is 'take the pain upfront,'" he said. It's not chicken and egg, it's "just chicken," he added. "You have to build it all off your own balance sheet and then the money comes in....I was prepared for all that." 

While some of Jain's portfolio managers chat to headhunters, others say they're more than happy there. "I think any PM that is underperforming will be talking to headhunters," says one. "This is true of any funds and not specific to Jain. I think the culture at Jain is very strong and most PMs at least the performing ones are going to stick around because of their loyalty to Bobby," he adds.

Jain Global's PMs have a few other inducements to prevent them from acting on headhunter conversations. Bobby Jain implies that he doesn't have a strict approach to drawdowns in the style of Millennium: at Jain Global, he says it's about pre-and post mortems of trades, implying discussion instead of automatic exits. 

Jain says he's about talent development rather than hiring and firing. "My real business proposition is talent acceleration and taking good people and making them great," he informs the podcast. Bobby declares that he's interviewed over 200 risk takers during his career and says he's after the "35-year-old-killers" who just need someone in their corner in order to perform, plus the steady producers too. He says that you can tell whether portfolio managers are any good by how they discuss risk: "Some people when they lost money, they start using the passive tense. So when they talk about making money, they use the active tense. When they start talking about the winning trades, they talk about clever they were." 

Many of the portfolio managers at Jain Global therefore seem likely to be ambitious but clear-headed 35-year-olds whom 55-year-old Bobby Jain is mentoring himself. If they only ignore the headhunters, they could make big money. Jain Global is already achieving lift off, insists Bobby: "As you get more data...as you get more experience, that all gets better and it gets better every day and the teams get more comfortable with each other every day. And I feel that palpably."

Bobby Jain himself is clearly determined to see his construction fly, even though he says his parents recommended a different tempo for later life. "They taught us from the age of 5 to 20, focus on education, 20 to 35, focus on career, 35 to 50, focus on family, 50 to 65 on service, 65 to 80 on philanthropy, 80 to 95 on spiritualism," he told the podcast, before observing that the time frames don't have to be exact. 

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