With the absence of the traditional Christmas magazine quiz, here’s an interesting conundrum for Family Capital readers - what is a private investment partnership and are they about to catch on?
The reason we ask these questions is because a big hedge fund called BlueCrest Capital Management recently said it ditching its external clients and converting to a PIP. BlueCrest, run by billionaire Michael Platt and based in the Channel Island of Jersey, is finding it tough in the fee-squeezed world of hedge funds, so has decided to change its structure, but will not just manage Platt’s money but also his staffs. Effectively, it has become a closed multi-family office.
Platt said in a statement: “The new model provides the opportunity to create significant value for our partners, our traders and our staff, due to a step-change in our profitability...We have delivered industry-leading returns to our investors over the past 15 years but believe that BlueCrest is now better suited to a Private Investment Partnership model.”
Now, calls to various law firms in London and New York yielded very little insight into what exactly is a PIP. Some hedge funds in the US are structured as PIPs, but that doesn’t shed anymore light on them. Try doing a Google search on PIPs and very little is revealed. A request from some clarification from a BlueCrest spokesman drew a black, although he did say in terms of benefits, a PIP structure is more profitable when you’re managing your own money.
Given that they are more profitable, are we about to see more hedge funds/family offices convert to PIP structures?
Any insights about PIPs would be more than welcome.