It seems that ESL Investments' much-ballyhooed move to Florida is less than meets the eye.
The $10.5 billion hedge fund has indeed relocated to the Sunshine State. But most of its staffers remain in Connecticut—indeed, remain in the same Greenwich offices that formerly housed ESL's offices. In fact, ESL has just two employees now, based in its new Bay Harbour, Fla., home.
But one of them is firm founder and portfolio manager Edward Lampert, who is in line to save millions of dollars in taxes by moving south; unlike Connecticut, Florida has neither income nor capital gains taxes. Lampert reportedly still splits his time between the two states.
Meanwhile, almost all of ESL's employees remain in Connecticut, where about 20 of them now work for two firms founded by former ESL CFO Adrian Maizey. And at those two firms, Rand Capital and Rand Group, the former ESLers do basically the same things they did at ESL, for ESL: The companies provide back- and middle-office functions, research and investment ideas to ESL.
Rand Capital offers research exclusively to ESL, while Rand Group plans to offer its services to other hedge funds. In addition, Maizey may start another research firm to serve other firms.
William Crowley, president and chief operating officer at ESL before the move, did not join either Rand company.
According to Hedge Fund Alert, the new structure was partly due to Lampert's desires to avoid taxes and cut costs. But it also stemmed from the fact that Maizey and most of the hedge fund's staff didn't want to move to Florida. So Maizey suggested the spin-off and outsourcing arrangement.