Highbridge Vet Launches Quant Equities Fund

Nov 19 2013 | 1:40pm ET

Highbridge Capital vet Edward Tolson is launching his own hedge fund.

Blue Basin Capital, an algorithmic long/short equity strategy focused on stocks with daily trading volume less than $10 million, will begin operation on January 1.

Tolson was at Highbridge Capital, the JPM-owned hedge fund, from 2003 to 2012, serving as managing director of equity trading technology. Prior to that, he was a founding team member at Intelligent Trading Desk.

Tolson told FINalternatives he expects to launch with $10 million but will limit the size of the New York-based fund to $25 million:

“I saw first-hand the trend of the past several years of capital concentration at the largest managers, to the direct detriment of fund performance,” Tolson said in an email. “With that backdrop and the mediocre performance that's resulted at many of the largest managers, I thought this was the perfect opportunity to deploy a fund with a dramatic capacity limitation but the ability to deliver a truly exceptional return profile.

“Price movements in these stocks are heavily driven by short-term supply and demand dynamics, creating very attractive investment opportunities for algorithmic strategies. However, large quant funds ignore this universe because it's infeasible to quickly build multi-million dollar positions.”

By limiting the fund size, Blue Basin seeks to capitalize on these capacity-constrained opportunities, and deliver a Sharpe ratio over 3.  

Blue Basin employs five people in full and part-time capacities and charges standard 2 and 20 fees.



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