CircleUp is drawing talent from firms such as General Atlantic and State Street Corp. as it ramps up efforts to bring quantitative investing to private markets.
Starting this month, David Topper, an operating partner at private equity firm General Atlantic, is becoming much more involved in the firm’s day-to-day operations, according to Neil Constable, CircleUp’s chief investment officer. Topper, who was an early investor in CircleUp, will also be assisting with the firm’s fundraising efforts, Constable said Wednesday in a phone interview.
CircleUp, founded in 2012, is expecting that its systematic private equity fund will complete a first closing of $100 million before the end of June, according to Constable. The San Francisco-based firm is pioneering quantitative investing beyond public markets, seeking to raise about $375 for the systematic fund.
Constable, who previously oversaw quantitative research at GMO, became the firm’s first CIO in July. He has been on a hiring spree since then, recruiting from firms such as AQR Capital Management, PJT Park Hill and Columbia Threadneedle Investments to build out CircleUp’s systematic, discretionary and credit strategies.
For a young firm like CircleUp, “talent density” is an important part of its expansion, Constable said. The firm, which provides equity and loans to small consumer companies, is building its strategies on top of data pulled together to identify brands poised for “break-out” growth.
Soon after hiring Ark Shi from AQR in October to help with CircleUp’s systematic efforts, Constable recruited Nisrath Rajan, who previously filled quantitative roles at State Street and BlackRock. Rajan joined the firm in December as a data scientist and quant researcher focused on predictive models in private equity, Constable said.
While fundraising for the systematic pool is slower than CircleUp expected, anchor investors are circling the fund to get comfortable with the new strategy, according to Constable. The fund will back about 100 companies selected by the firm’s machine learning technology, he said, explaining that some investors have questions surrounding how it will execute that many deals for its portfolio within three years.
“It’s not that they don't believe we can do it,” Constable said. “It’s that no one has done it before.”
CircleUp has been adding to its credit staff over the past few months.
Last month, Michael Poole, who previously ran Columbia Threadneedle’s European high-yield business in London, became the head of risk for CircleUp’s credit strategy, according to Constable. And in October, the firm hired Nick Rockwell from peer-to-peer lender Funding Circle as the head of growth within credit, according to Constable.
Poole “successfully managed credit portfolios through the financial crisis, which is no small feat,” said Constable, explaining that was one of the reasons he hired him. “To get him is a big coup.”
CircleUp has a $200 million credit fund that provides short-term, asset-based loans to consumer businesses, he said. Poole examines companies’ creditworthiness to price the loans, while Rockwell uses CircleUp’s data to identify borrowers the firm may contact because they likely need loans to grow, according to Constable.
“With the advent of data in the private markets, there are so many opportunities to really have a huge advantage if you can harness the data,” he said. “It is the future.”