Adage Capital Management Explained

Adage Capital Management, L.P.
Type:Private
Industry:Investment Management
Location:200 Clarendon Street, Boston, Massachusetts, U.S.
Aum:US$46 billion (June 2023)
Num Employees:53 (2023)
Footnotes:[1]

Adage Capital Management (Adage) is an American investment management firm based in Boston.[2]

Background

Phillip Gross and Robert Atchinson met as investment analysts at the Harvard University endowment in the mid-1980s.[3] In the 1990s, some Harvard faculty and alumni criticized the institution for paying multi-million dollar performance bonuses to some Harvard Management employees.[4] In part due to such scrutiny, the pair left Harvard to form their own firm, Adage Capital Management. They took with them an 18-person team and a $1.8 billion day-one investment from Harvard in exchange for an initial agreement (now expired) to pay ten percent of Adage's earnings to the university.

Adage invests primarily in the S&P 500 equity market universe, based on fundamental analysis.

Adage pays partial rebates of prior year fees to its investors when the fund's performance fails to outperform the S&P 500 benchmark.[5] [6] The firm has only had to refund its fees on a few occasions.[7]

Adage has made private equity investments in startups and early stage companies, including Forter,[8] GitLab,[9] Gopuff,[10] HawkEye 360[11] and Tanium.[12]

Adage manages assets primarily for tax-exempt institutions.[13]

In 2015, Adage was reported to be one of the world's top 10 largest hedge funds after its assets under management doubled in the last four years. It had an annualized return of 9.7% since inception which was higher than S&P 500 benchmark of 6.4%. However the next year for the first time it significantly underperformed the S&P 500 benchmark for a fiscal year with a return of 1.1% for the 12 months ending in June.

Adage was ranked third among all major hedge funds in the Institutional Investor 2016 Hedge Fund Report Card citing strong scores in Alpha generation, risk management, alignment of interest, infrastructure and independent oversight.[14] However Adage received poor scores for transparency and investor relations as the firm was noted to be extraordinarily secretive and did not give out much information to investors or the media.

Notes and References

  1. Web site: Form ADV . SEC . December 23, 2022 . December 23, 2022 . https://web.archive.org/web/20221223170137/https://reports.adviserinfo.sec.gov/reports/ADV/160679/PDF/160679.pdf . live .
  2. News: Copeland . Rob . How the World's Biggest Stock Hedge Fund Stayed a Secret . December 23, 2022 . Wall Street Journal . September 10, 2015 . en-US . September 19, 2019 . https://web.archive.org/web/20190919073414/https://blogs.wsj.com/moneybeat/2015/09/10/how-the-worlds-biggest-stock-hedge-fund-stayed-a-secret/ . live .
  3. News: Copeland . Rob . Giant Hedge Fund's Radical Idea: Performance Guaranteed or Your Money Back . December 23, 2022 . Wall Street Journal . September 10, 2015 . en-US . December 25, 2022 . https://web.archive.org/web/20221225033225/https://www.wsj.com/articles/giant-hedge-funds-radical-idea-performance-guaranteed-or-your-money-back-1441858527 . live .
  4. News: Bulkeley . William . Two Money Managers at Harvard Quit Endowment to Start Own Firm . December 23, 2022 . Wall Street Journal . June 14, 2001 . en-US . December 23, 2022 . https://web.archive.org/web/20221223174537/https://www.wsj.com/articles/SB992486590713278634 . live .
  5. Web site: When a Harvard Pedigree Won't Help You . December 23, 2022 . Institutional Investor . April 3, 2017 . en-gb . December 23, 2022 . https://web.archive.org/web/20221223181548/https://www.institutionalinvestor.com/article/b1505qdcx4nkk0/when-a-harvard-pedigree-wont-help-you . live .
  6. How One Hedge Fund Is Shaking Up the Industry . December 24, 2022 . Time . en . December 24, 2022 . https://web.archive.org/web/20221224021750/https://time.com/4029556/adage-capital-management/ . live .
  7. News: August 9, 2016 . Adage Capital Trailing Stocks Says 'Smart Beta' Distorts Market . en . Bloomberg.com . December 23, 2022 . August 16, 2016 . https://web.archive.org/web/20160816041813/http://www.bloomberg.com/news/articles/2016-08-09/adage-capital-trailing-stocks-says-smart-beta-distorts-market . live .
  8. Web site: Lunden . Ingrid . May 25, 2021 . Forter raises $300M on a $3B valuation to combat e-commerce fraud . December 23, 2022 . TechCrunch . en-US . December 23, 2022 . https://web.archive.org/web/20221223180220/https://techcrunch.com/2021/05/25/forter-raises-300m-on-a-3b-valuation-for-a-platform-to-combat-e-commerce-fraud/ . live .
  9. News: September 17, 2019 . GitLab raises $268 million in funding, may look at direct listing . en . Reuters . December 23, 2022 . December 23, 2022 . https://web.archive.org/web/20221223180220/https://www.reuters.com/article/us-github-ipo-idUSKBN1W21JG . live .
  10. Web site: Lunden . Ingrid . July 30, 2021 . Gopuff confirms new $1B cash injection at a $15B valuation to expand its instant grocery delivery service . December 23, 2022 . TechCrunch . en-US . December 23, 2022 . https://web.archive.org/web/20221223180222/https://techcrunch.com/2021/07/30/gopuff-confirms-new-1b-cash-injection-at-a-15b-valuation-to-expand-its-instant-grocery-delivery-service/ . live .
  11. Web site: Werner . Debra . November 9, 2021 . HawkEye 360 raises $145 million in Series D round . December 23, 2022 . SpaceNews . en-US.
  12. News: October 2, 2018 . Tanium raises $200 million in latest funding, valuation at $6.5 billion . en . Reuters . December 23, 2022 . December 23, 2022 . https://web.archive.org/web/20221223180222/https://www.reuters.com/article/us-tanium-funding-idUKKCN1MC1IN . live .
  13. Book: Kumar, Rajesh . Strategies of Banks and Other Financial Institutions: Theories and Cases . July 16, 2014 . Elsevier . 978-0-12-417167-1 . en . December 24, 2022 . December 24, 2022 . https://web.archive.org/web/20221224023925/https://books.google.com/books?id=UwN0AwAAQBAJ&pg=PA501 . live .
  14. Web site: Taub . Stephen . January 27, 2021 . The Hedge Fund Report Card . https://web.archive.org/web/20210127021514/https://s3.amazonaws.com/citadel-wordpress-prd102/wp-content/uploads/2016/10/05202440/II_Alpha_HFRC_2016_Citadel.pdf . January 27, 2021 . December 24, 2022.

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