• The news of the potential tie-up has the industry gossiping, with a paparazzi-like picture swirling.
• But Millennium’s reported investment into rival hedge fund Schonfeld is far from a done deal.
• Schonfeld is in conversation with large investors like Singapore’s GIC and Abu Dhabi’s sovereign wealth fund.

The picture that has been making the rounds in the world of hedge fund rumors does not depict a billionaire’s newest vacation home; rather, it depicts a typical business lunch in midtown Manhattan, which is a fairly common occurrence.

People are talking about the following people because of a photo that looks like it was taken by paparazzi: At The Grill, a steakhouse located around the corner from Millennium’s Park Avenue offices, are seen seated billionaire founder of Millennium Izzy Englander, his co-chief investment officer Justin Gmelich, and Schonfeld chief executive Ryan Tolkin.

Millennium is in talks to put billions into Schonfeld, which has lagged behind its multi-strategy peers in performance over the past two years. Sources told Insider that the appearance of the photo helped spark the frenzied speculation about a tie-up of the two firms. The potential transaction, in which Millennium could become a limited partner in the $13 billion fund and take a share of the fund’s revenue, has been the subject of much discussion within the sector. Following conversations with industry insiders, it has become abundantly clear that the transaction is by no means a done deal.

Representatives from Schonfeld and Millennium declined to comment on the matter.

The Millennium deal is a coin flip.

According to three people with knowledge of the situation, many employees at Schonfeld were taken aback when they learned of the reports of a deal with its much larger competitor after reading about it in a report published by the Financial Times.According to the people who were interviewed, senior management at Schonfeld has since made an effort to calm the nerves of concerned staff members by emphasizing in internal messaging that an agreement was far from being finalized and that Millennium made the initial overture. It was communicated that a partnership with Millennium was a 50-50 proposition, and that Schonfeld’s continued autonomy would be a prerequisite for any agreement that was reached.

The assertion was met with skepticism from a number of industry experts, one of whom referred to it as “naive” to think that Millennium, a much larger fund with a greater emphasis on risk, would allow the fund to operate independently.

“If they take Millennium’s money, regardless of how it’s constructed, it’s the end of independence for Schonfeld,” a spokesperson stated.

However, Millennium is not the only alternative that can be considered at this time.

According to our sources, Schonfeld, which developed from the family office of billionaire Steve Schonfeld and is managed by Tolkin, has been in the process of raising capital from large institutions, such as the Abu Dhabi Investment Authority, with a timeline of nailing down commitments by the end of the year. Blackstone, the Government Investment Corporation, and Future Fund, an Australian sovereign wealth vehicle that is already a significant investor in Schonfeld, are some of the other strategic investors in the mix. Representatives of the funds either refused to comment on the matter or did not respond to a request for comment on the matter.

As a result of the fund’s lackluster performance this year, Schonfeld has been forced to reduce its expenses and slow down its hiring efforts in recent months.

However, soliciting funds from cautious institutional investors can be a time-consuming process. Millennium chief trading officer Mark Meskin contacted Schonfeld’s leadership to discuss the possibility of a tie-up, according to sources.

According to sources within the industry, Schonfeld was probably feeling the heat from existing investors, who have been forced to shoulder a greater proportion of the fees following redemptions. Because approximately fifty percent of the company’s assets are already committed through the year 2024, a sizeable portion of these investors won’t be able to get their money back for some time.

Still, people at Schonfeld were taken aback when they heard about the investment, as the company has always prided itself on having a more lenient culture than its multi-strategy competitors. In an interview with Insider, sources close to Schonfeld speculated that Millennium, which has a large amount of undistributed capital and a deadline to invest at the end of the following year, pushed the story out in order to expedite the process.

According to a source close to the firm’s senior management, whoever ends up forming a partnership with Schonfeld will not have the ability to pick and choose which strategies they want to implement. They said that the new investor would be involved in all of Schonfeld’s strategies in a comprehensive manner.

Even though the individual who is close to the fund’s management claims that they aren’t shopping themselves to peers, others in the industry are now aware that Schonfeld is at least taking these meetings. This is the case even in the event that the deal is not finalized.

One veteran participant in the market made a joking comment along the lines of “I wouldn’t be surprised if Citadel swooped in with a better offer.”