Texas Hedge Fund Industry Makes a Comeback

By Elana Margulies

The mantra that “everything’s bigger in Texas” bodes true for the state’s alternative investment industry as well. Throughout the last year or so, the Lone Star State has made a massive comeback in ensuring its spot as one of the top U.S. hedge fund capitols due to the plethora of new fund launches, especially in Dallas. This is a complete turnaround from what the region experienced a couple of years prior when a number of high-profile hedge fund managers specifically in the Dallas/Fort Worth (“DFW”) area decided to close shop including Highside Capital Management, Walker Smith Capital Management, Kleinheinz Capital Partners and Corriente Advisors.

But no fear, some people who worked at those firms no longer in existence have rebounded to start their own new hedge fund managers. Jonathan Gattman from Highside formed long/short value firm Cloverdale Capital and Andrew Sinwell, also from Highside, founded N2 Capital Management. Adam Rodman from Corriente started Segra Capital Management.  John Labanowski, formerly of Walker Smith, debuted Brenham Capital Management, a long/short energy strategy. On top of those, another one to hit the DFW circuit this year is Brookdale Capital, started by Adnan Rehmatullah, who came out of Crestline Investors.

According to alternative investment data provider Preqin, in 2014 there were 13 reported new fund launches in Dallas alone, after 8 in 2013.  Preqin data also revealed that Houston and Austin have seen a surge of new hedge fund launches last year and for most of this year. In Houston, there have been 8 new ones this year so far and 22 last year while Austin had 6 this year and 5 last year. 

It’s no surprise that energy-focused offerings have thrived in the state. Oil mogul T. Boone Pickens’ BP Capital’s newly formed public fund vehicle division, BP Capital Fund Advisors, has seen its BP Capital TwinLine™ Energy Fund outperform other energy offerings. It is up 2.25% year-to-date through the end of November, compared to the Equity Energy Index which is down 13.55% for the year.