CT cements status as 'hedge fund capital' despite COVID, as Greenwich Economic Forum returns

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GREENWICH — Before the COVID-19 pandemic struck, southwestern Connecticut ranked as one of the world’s top destinations for financial-services firms. Amid the upheaval of the past 18 months, the area has solidified its status as an industry hub.

The resilience is reflected in the trajectory of hedge funds, a branch of the financial-services sector whose Connecticut-based firms cumulatively account for thousands of jobs and several hundred billion dollars in assets under management. Hedge fund advocates see the potential for even more local growth, with the upcoming Greenwich Economic Forum highlighting the state’s prominence in the investing community.

If you go

The Greenwich Economic Forum will be held Tuesday through Thursday. The events on Tuesday and Wednesday will be held in person at the Delamar hotel in Greenwich, while the program on Thursday will be held entirely online.

GEF speakers will include:

Ray Dalio, founder, co-chief investment officer and chairman of Bridgewater Associates

Annie Lamont, co-founder and managing partner of Oak HC/FT and the first lady of Connecticut

Gov. Ned Lamont

Alan Greenspan, former chairman of the Federal Reserve and senior adviser at RockCreek

Steve Case, CEO and chairman of Revolution

Marcie Frost, CEO of CalPERS

Daniel Loeb, CEO and chief investment officer of Third Point

For information about the Greenwich Economic Forum, visit greenwicheconomicforum.com/

“I think COVID has done more to help the local financial scene than anything right now,” Bruce McGuire, president of the Connecticut Hedge Fund Association and co-founder of the Greenwich Economic Forum, said in an interview.

“There are many people that even if their office wasn’t here in Greenwich, they lived here in Greenwich and they would commute every day into New York City,” he said. “Many of those people aren’t going to go back to New York City. The number of people and firms who are going to set up a satellite office or work from home in Greenwich is going up.”

‘We are doing very well’

In contrast with the fallout from the global financial crisis of 2008, the U.S. financial services sector has not been decimated by the pandemic.

Since the beginning of the global public health crisis, hedge funds “on aggregate … did not fall as far and recovered faster than public markets,” according to a 2021 report by Preqin, a data and analytics provider for the financial services industry. Returns across the asset class totaled nearly 17 percent for the past year.

“As alternatives to (hedge funds) become more widespread, the lure of the incumbents becomes a little less shiny,” Lawrence J. White, a professor of economics at New York University, said in a recent interview. “But the hedge funds are not going away — that’s for sure.”

In Connecticut and elsewhere, hedge funds have benefited from the continuity provided by their employees’ ability to work remotely in the past year-and-a-half. As specialists in “alternative investments,” hedge funds invest across numerous categories, including stocks, bonds, currencies, derivatives and real estate.

Among the states, Connecticut hosts the fifth-largest number of hedge fund managers, with a total of 256, according to Preqin. Only California, New York, Texas and Florida have more.

Westport-based Bridgewater Associates ranks as the world’s largest hedge fund by assets under management, with a total of $152 billion, according to Preqin. Its investor base includes sovereign wealth funds, public and corporate pension funds, university endowments, charitable foundations, foreign governments and central banks.

Ray Dalio, founder and co-chief investment officer of Bridgewater, will speak Tuesday at the Greenwich Economic Forum. The Greenwich resident has participated at each edition of the GEF since its 2018 launch. The GEF is resuming in-person programming this year at the Greenwich Delamar hotel after it was held in an all-online format last year because of the pandemic.

“Our vision is to create in Greenwich a Davos-like event that has, at its core, finance and alternative investments — meaning the hedge fund, private equity and venture capital world,” McGuire said. “As far as our ability to bring in the world’s top investors, we are doing very well.”

Among other initiatives, Bridgewater announced last month a partnership with financial-technology firm iCapital Network. Through the alliance, iCapital plans to provide a customized technology platform enabling registered investment advisers and family offices to access Bridgewater’s strategies for “ultra-high-net-worth” clients in the U.S.

In an unrelated undertaking, iCapital Network announced in June plans to open offices in downtown Greenwich and bring about 200 jobs to the state.

“Creating opportunities forby wealth advisers and their qualified clients to access institutional-quality investments has always been our core mission at iCapital,” Lawrence Calcano, CEO and chairman of iCapital, said in a statement. “We are excited to partner with such a prominent team as Bridgewater to bring access to these strategies to the wealth management community.”

A hedge fund hub

About 7,650 workers are employed at Connecticut-based hedge funds, according to data from Preqin and the Connecticut Hedge Fund Association.

Bridgewater operated with about 1,600 full-time employees as of June 2019, according to the most recent data available from the state Department of Economic and Community Development. At the same point, Greenwich-headquartered AQR Capital had about 740 full-time positions, according to DECD.

The Steven Cohen-founded Point72 employs more than 1,650 worldwide. Headquartered in Stamford, it has a local workforce of about 550. It ranked as the city’s 14th-largest employer in the second quarter of this year, according to Stamford’s Office of Economic Development.

While the state remains a hedge fund hub, employment in financial services is still significantly lower than before the financial crisis. Financial activities accounted for about 118,000 positions statewide in August — 19 percent less than the sector’s 145,000 workers at the start of the 2008-10 recession, according to the Department of Labor.

Concerns that Connecticut could potentially lose more finance jobs contributed to the decision of then-Gov. Dannel P. Malloy’s administration to approve eight-figure subsidies for Bridgewater and AQR Capital through First Five Plus. Launched in 2011, the program has provided subsidies to major companies in return for them keeping jobs and hiring in Connecticut.

The state awarded a $17 million loan to Bridgewater — with about $8.3 million forgiven and the balance also eligible for forgiveness. The firm also received a $5 million grant and could additionally earn up to $30 million in tax credits.

AQR received a $28 million loan — all of which is eligible for forgiveness — and a grant of up to $7 million.

Messages left for Bridgewater and AQR were not returned.

Some critics of hedge funds have questioned why firms such as Bridgewater Associates and AQR Capital needed to receive state subsidies given that their founders are billionaires and since their employees frequently earn compensation well above state averages.

Industry backers counter that the taxpayer-funded incentives are justified because Connecticut has faced competition in recent years from other states willing to offer subsidies to persuade hedge funds to relocate.

“It’s very important for Connecticut to have big firms like AQR and Bridgewater here to maintain its position as one of the hedge fund capitals of the world,” McGuire said. “And some of the junior people in a firm graduate and decide, ‘I want to set up my own shop.’ To have those people living and working here is good for Connecticut.”

pschott@stamfordadvocate.com; Twitter: @paulschott