For the first time in history, a hedge fund has a formal valuation: "Multi-strategy giant" Millennium valued at $14 billion

Millennium Management is about to be tagged with a public price tag of $14 billion.

On June 16, according to media reports, Millennium Management, which manages over $75 billion in assets, is in discussions with Goldman Sachs' Petershill Partners to sell a minority stake of 10% to 15% in its management company. Notably, this is the first time an official valuation has been given to this hedge fund giant—up to $14 billion.

The report pointed out that Petershill itself is a minority stake buyer in alternative investment management companies, and the target investors for this transaction will include its own clients as well as the largest investors in Millennium funds. This deal will position Millennium among the highest-valued hedge fund management companies globally.

As a multi-strategy giant on par with Ken Griffin's Citadel and Steve Cohen's Point72, Millennium operates under its New York headquarters with over 320 investment teams, making cross-asset class investments within a stringent risk framework. Currently, both Millennium and Petershill have declined to comment on the matter.

Controversy and Restructuring of Valuation Logic

The $14 billion valuation is undoubtedly astonishing, but it has also sparked a review of the valuation logic of hedge funds in the market.

Traditionally, hedge fund valuations are primarily based on the two types of fees they charge: management fees and performance fees. Management fees are seen as a more predictable source of income, thus enjoying a higher valuation multiple in the market compared to the highly volatile performance fees.

Millennium's reformed fee structure—especially the 1% minimum fee—has made its income stream more stable, providing strong support for its high valuation.

However, reports indicate that a private equity consultant has a different view. He pointed out that even for multi-strategy hedge funds like Millennium, which have long-term locked capital, the valuation multiples obtained from management fees are typically lower than those of mature private equity firms. Nevertheless, the consultant also acknowledged:

If all factors are considered, Millennium's price-to-earnings ratio is far lower than that of a well-known private equity firm. But investors may still be attracted by Millennium's brand appeal.

The report analyzes that this brand premium may break traditional valuation models. Supporting Millennium's strong brand and high valuation is its long-term robust performance record.

The company's flagship fund has achieved an annualized return of approximately 14% since its inception. According to data disclosed by investors, the fund achieved a return of 15.1% in 2023, rising about 0.4% year-to-date as of May.

Preparing for Institutionalization

Behind this unprecedented equity opening is founder Izzy Englander's carefully planned "post-Englander era" for the company.

For the past 36 years, this septuagenarian founder has been the sole owner of the company. Now, he is taking a series of measures aimed at institutionalizing the company and paving the way for a future "without him." Selling a minority stake is part of a dual strategy. On one hand, it introduces stable external strategic investors for the company's future; on the other hand, Millennium is planning to allocate equity to its senior management for the first time, transforming the company's ownership from being solely held by one person to being shared among the core team, thereby incentivizing and retaining top talent.

Prior to this, Englander had taken a series of key measures to consolidate his empire:

• Locking in capital: He has moved the majority of investors' funds into a long-term share class, extending the withdrawal period from one year to five years, greatly stabilizing the company's capital base.
• Strengthening leadership: He has brought in a series of senior management talents from institutions like Goldman Sachs, creating a strong leadership team.
• Restructuring the fee structure: A new fee model has been implemented, where investors now have to pay a minimum fee regardless of fund performance, typically around 1% of assets or 20% of investment returns. Bankers believe this effectively makes its revenue structure closer to stable management fees.
• Seeking strategic partnerships: Millennium is also in talks with BlackRock, the world's largest asset management company, for a strategic partnership, which may include BlackRock acquiring a small equity stake