Phase 2 Partners officially launched with roughly $150 million in commitments from multiple investors, including a strategic partnership with the Employees Retirement System of Texas (Texas ERS) and PAAMCO Launchpad, the emerging manager initiative of FoHFs group PAAMCO Prisma.
Panayiotis Lambropoulos, portfolio manager of hedge funds at Texas ERS, said that Phase 2 is well-positioned and led by an experienced team to navigate an alpha-rich environment starting in 2021 and beyond. The expected growth in the traditional financial services industry and global expansion of fintech should serve as the “foundation for the next frontier of investing” within capital markets, he added.
The PAAMCO Launchpad emerging manager platform initiative with Texas ERS began in 2018.
Officials at PAAMCO Launchpad said they have been pleased with the 2020 performance of their first seed, Cinctive Capital, which was founded by Rich Schimel and Larry Sapanski.
As of August 31, 2020, Cinctive had generated a positive 7.41% year-to-date return while maintaining an average 2.8% net long beta adjusted exposure, according to Texas ERS meeting documents.
PAAMCO Launchpad officials intend to build on these results with a strong pipeline of managers and capital this year.
Phase 2 was established by industry veteran Justin Hughes, who is a financial sector long/short equity manager with a U.S. and Europe focus. Based in San Francisco, the firm is set to target investments in traditional financial sub-sectors as well as areas in fintech. This includes traditional asset managers, global exchanges, retail brokers, alternatives asset managers, payments, bank technology, financial information and transaction hardware/software, among others.
In an announcement on the seeding, PAAMCO Launchpad and Texas ERS said they see today’s global financial landscape rapidly changing as a result of unprecedented monetary intervention, capital manipulation, potential peak of global equity markets and technology.
“It is not easy to find a cohesive team with a significant and attractive track record, one that managed capital during the GFC and the current pandemic,” said Tom Tull, chief investment officer at the $30 billion Texas ERS. “The fact that PAAMCO Prisma has invested with Mr. Hughes since 2005 gives us great confidence.”
Hughes co-founded and was the co-portfolio manager of Philadelphia Financial Management of San Francisco, from 2004 to 2020. The financials-focused long/short equity firm grew to nearly $700 million and was closed to new capital for much of that time.
Co-Founder of Philadelphia Rachael Clarke has joined Hughes at the new firm, which will officially spin-out as an independent, RIA this month. Clarke and Hughes are joined by two additional senior investment professionals Andrew Del Medico and Ian McBane in addition to support staff.
“The financial sector as we define it, touches nearly every business in the world,” said Hughes, co-founder and CIO of Phase 2. “Capital owners, allocators, lenders, borrowers and investors have serious decisions to make about their strategic approach as a result of today’s rapidly changing capital market environment.”
“We believe Phase 2 is an exciting seeding opportunity for ERS and us,” said Andrew Gitlin, CEO of PAAMCO Launchpad. “In over 30 years of seeding, I have rarely encountered a situation where the manger we seed has both solid experience and character as well as an audited 17-year track record to back it all up.”