Inside Eisler Capital today: "I've had 12 calls from headhunters"

Eisler Capital has succumbed. In a letter sent to investors today and seen by eFinancialCareers, founder Ed Eisler said the fund is returning capital to its investors and winding down its portfolio by year-end. Bloomberg notes that its returns were -1.7% this year through to August.

Although Eisler Capital's demise was widely expected in the market, it came as a surprise to some of those working there.  Even Ed Eisler's direct reports are understood to have been shocked by the timing. "August and September had been good months," says one senior insider. "April was the nadir, before the cuts, but things had stabilised and we were hopeful that with a new year coming, and with the costs being passed through, we'd be ok."

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Ed Eisler didn't respond to a request to comment for this article. Nor did the firm's other senior people, including deputy CIO Sam Wisnia, COO Chris Milner and US CEO Carey Nemeth. Nor did the firm's official spokespeople. But as the autopsy begins, there's no shortage of opinions on where Eisler went wrong. 

"The real risk-takers, the people with all the big books left a while ago," says one former senior portfolio manager at Eisler, pointing to departures like those of Lewis Morton, Mark Mallon, Adrien Delattre and Sean Gambino. "They didn't have enough people left with experience of taking and managing a lot of risk."

Others describe a fatal combination of "scale, performance, economics and reputation." Eisler has $3.2bn under management and 250 staff. "After careful consideration of these factors and others, including the application of projected 2026 costs on an anticipated smaller capital base, we are no longer confident of our ability to achieve the Fund’s investment objective of delivering superior absolute returns," says Ed Eisler in today's letter. 

While there are wild and probably apocryphal rumours of illiquid investments in "exotic fixed income derivatives", Eisler insiders say the real problem was costs. They were too high, particularly for talent.

"Portfolio managers have a habit of over-selling themselves," says one Eisler insider. "It's very hard to know whether the person you're hiring will make money consistently, and everyone wants to be highly paid." 

Eisler turned over its fair share of portfolio managers and many of those who left complained of having their risk cut by suddenly by Sam Wisnia, the deputy CIO, described by some as "Marmite" to work with. While Wisnia has his detractors, however, he also has his fans. This is particularly the case among the team of "strats" who've worked with Wisnia for decades, but it applies to some portfolio managers too. "Sam can be difficult if you challenge him on a mathematical issue but is also an amazing human," says one former portfolio manager. Ed Eisler is a "brilliant and amazing guy," he adds; "This breaks my heart for him."

Insider Eisler's London office today, it seemed the main thing that was breaking was the system for booking meeting rooms. Insiders said they were all taken with colleagues speaking to headhunters: "I've had 12 calls," one told us. One headhunter said the best people at Eisler have been snapped up already, even though the fund is supposed to be winding down slowly to the end of the year. 

Part of their appeal will be the lack of non-competes. In normal circumstances, Eisler's junior people have three months' notice and a three month non-compete and its top people are locked in for a year's notice and a year's non-compete. Now they may be free to leave with no need to buy out bonuses. 

There could be plenty of takers. Despite the fund's recent struggles, Ed Eisler noted today that Eisler Capital returned 7% at a compounded net annual rate since its inception, with a Sharpe of 1.7. However, some insiders noted that Eisler's more mediocre portfolio managers will now simply fan out across the industry and dilute returns elsewhere. "They had far too many junior people who didn't know how to take risk," says one ex-portfolio manager there. "The duration was against them at every level: they were subscale, they kept losing people, and they had to constantly pay to replenish them." 

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