Reports Diamondback partners to start again

September 14, 2018 GMT

Eight years after federal agents descended on the Stamford office of Diamondback Capital Management, the firm’s former principals are starting a new, $500 million hedge fund according to multiple reports.

Richard Schimel and Lawrence Sapanski did not confirm any plans to Reuters or the Wall Street Journal, which reported the fund would be based in New York with backers that include Blackstone Group. Schimel most recently worked for Citadel which has offices in New York City and Greenwich, with Schimel having been chief investment officer of Diamondback.

After a Diamondback employee was charged with insider trading, the firm paid $9 million in penalties and other levies initially, despite the U.S. Attorney for the Southern District of New York clearing the firm’s senior partners of any wrongdoing.

In an unusual outcome, the federal government would repay Diamondback the full amount after vacating its case against the firm, with Schimel and Sapanski cashing out investors and Schimel going on to run Sterling Ridge Capital Management in New York City through 2016.

At its peak, Diamondback managed client assets of $6 billion from its main office in the Landmark Square office tower in downtown Stamford, with Reuters reporting the firm had an average annual return of 9 percent over its duration. Prior to starting up Diamondback with a third founder named Chad Lowethy, Schimel and Sapansky had been colleagues at SAC Capital, whose founder Steve Cohen is readying a new hedge fund in Stamford.

From his Armonk, N.Y., home, Schimel separately serves as president of A Little Hope Foundation, which provides grief counseling to children who have suffered the loss of a parent or another family member.

On a net basis from month to month, hedge fund capital flows have seesawed this year as tracked by an index maintained by SS&C GlobeOp which handles back-office administrative functions on an outsourced basis for hedge funds. The firm’s September report showed a slight decline in net flows, which Windsor-based SS&C stated was a typical pattern for the month, but noting the overall trajectory of the index is on a downward trend the past 12 months.

Alex.Soule@scni.com; 203-842-2545; @casoulman