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The 2016 Hedge Fund Rising Stars: Florian Kronawitter
White Square Capital CIO Kronawitter is taking advantage of hedge funds’ herdlike behavior to clean up.
In 2015, a year that saw the most hedge fund closures since the global financial meltdown, going against the grain proved to be a winning strategy. Just ask White Square Capital. The London-based market-neutral hedge fund firm run by CIO Florian Kronawitter and CEO Dennis Krings-Ernst returned 24.3 percent using a rules-based strategy, dubbed behavioral arbitrage, that seeks to profit from crowded investment strategies in North American and European large-cap equities.
The White Square Pure Alpha Fund, which has about $115 million in assets, is based on rules for taking advantage of value investing and trend-following strategies that respond to earnings reports, corporate events and actions, and outsize market reactions.
Kronawitter, 34, and Krings-Ernst, 33, struck up a friendship in 2003 while attending the University of St. Gallen in Switzerland. After obtaining a bachelor’s degree in management and economics, Kronawitter went on to receive a master’s in European studies from the London School of Economics and Political Science. The Munich native and son of the city’s former mayor Georg Kronawitter jumped into the hedge fund world in 2008, joining Paulson & Co. in London after a two-year stint with Merrill Lynch & Co.
At Paulson, Kronawitter, who was promoted to vice president in 2011, gained experience with all of the firm’s strategies, including debt, long-short equity and merger arbitrage. He observed that in many cases other investors followed similar buy and sell signals — such as those employed by risk arbitrage or value style managers — and that the huge piles of money chasing the same ideas tended to push stock prices higher or lower than they would end up a few days later. Wanting to strike out on their own, Kronawitter and Krings-Ernst started experimenting with a long-only strategy in 2012 while determining rules for short selling to build a scalable market neutral approach. The Pure Alpha Fund launched in September 2014 with $8 million from friends and family. At the end of April, it was already up 14.9 percent for 2016 and 52.1 percent since inception.
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