Hedge Fund Millennium Puts Up an Uncharacteristic Loss in February — WSJ

By Peter Rudegeair

About $900 million in losses spread across two teams at hedge fund Millennium Management contributed to the firm's worst monthly performance in over six years in February.

Millennium lost 1.3% last month, people familiar with the matter said. The losses, while modest in absolute terms and relative to other hedge funds, stand out in light of Millennium's long record of consistently positive returns and sharp risk management. The firm has only had one down year since Chief Executive Israel "Izzy" Englander founded it in 1989 and hadn't lost more than 1% in a given month since late 2018.

February was a choppy time in markets. Concerns over slowing economic growth and the impact of President Trump's tariff and other policies added to volatility and helped erase prior gains.

A broad hedge-fund index compiled by research firm HFR declined 0.47% in February. Only about half of hedge funds that HFR tracks made money in the month, down from nearly 80% in January.

With about $75 billion in assets under management, Millennium divides money across more than 340 semiautonomous teams of investment professionals to produce returns that aren't correlated with broader markets. Each team has its own specialty, from trading tech stocks to betting on the convergence of bond prices.

The firm imposes strict limits on risk-taking. Teams' buying power can be cut in half once their losses reach 5%, The Wall Street Journal previously reported. When losses reach 7.5%, a portfolio manager likely is out of a job, though Millennium sometimes can make exceptions.

Millennium's trouble in February included some wrong-way bets on which stocks get added to and subtracted from market indexes. Portfolio managers Glen Scheinberg and Pratik Madhvani and their respective teams each lost hundreds of millions of dollars last month on these so-called index-rebalancing trades, people familiar with the matter said.

Scheinberg and Madhvani have ranked among Millennium's biggest moneymakers in the past. Index rebalancing has accounted for billions of dollars of the firm's investment gains over the years, people familiar with the matter said.

Write to Peter Rudegeair at peter.rudegeair@wsj.com