Michael Hintze to start own hedge fund firm after selling $21bn CQS to Manulife

With $21bn in his pocket from the sale of his business, billionaire hedge fund manager Michael Hinze says he is planning to start over again.

Billionaire hedge fund manager Michael Hintze is starting over again in an attempt to defy a decline in the performance of star stock pickers and investors after agreeing to sell most of his $21bn CQS business.

Hintze, a Baron after being made a Member of the House of Lords last year, will launch a new firm to run his own flagship hedge fund when the sale of the London-based CQS to Canada’s Manulife Investment Management is finalised in early 2024.

It will mark the end of an era for Hintze, who will exit CQS 25 years after establishing the business that flew high before the global financial crisis and continued to outperform competitors until Covid-19 hit in 2020.

Hintze became a famous name in London’s financial sector and one of that city’s best-performing hedge fund managers. He has also been influential in Tory political circles, becoming a major donor to the party and other conservative and Catholic causes.

Manulife is buying the CQS credit platform, which has about $US13.5bn ($21bn) of assets under management, and the CQS brand, while Hintze will focus on his own activities through what is currently his Directional Opportunities Fund.

CQS funds trade financial instruments including structured credit, convertible bonds, asset-backed securities and equities, based on in-depth geopolitical, economic and market analysis.

“CQS brings to our portfolio a proven investment process, robust performance, and expertise across market cycles, and a culture that has attracted both talent and flows into the firm,” Manulife chief executive Paul Lorentz said.

Hintze, 70, said running his own Directional Opportunities Fund in a new entity was “an opportunity that I am excited about”.

Terms of the deal to sell CQS to Manulife were not disclosed.

Hintze’s personal fortune was valued at $3.12bn on this year’s edition of The List – Australia’s Richest 250, published by The Australian in March.

Hintze’s Directional Opportunities fund is reportedly up about 9 per cent year to date through to the end of October, and has delivered an annualised 10.8 per cent return since inception 18 years ago.

The fund has about $US1.5bn in assets, while another $500-600m in assets not in the flagship hedge fund will also leave with Hintze.

More widely, CQS had drawn praise for limiting its losses compared to many of its peers when the GFC hit in 2008 and performed well for more than a decade afterwards.

But when Covid hit in March 2020, many of CQS’s structured credit bets turned sour, and unusually the fund was hurt by some defaults, including Hertz car rental and its Chesapeake Energy bonds.

It convinced Hintze to turn more cautious, which then meant CQS missed out on the subsequent market rally.

His flagship fund took a 34.8 per cent hit as a result of structured credit bets that lost money in 2020. It has since gained 21.5 per cent in 2021 and 15.8 per cent in 2022.

CQS has managed more than $20bn before Covid, but losses in 2020 led to it shutting down some of its funds, spinning out non-core businesses and shedding some staff.

Most of its assets are now held in long-only investments – about 90 per cent of the assets it manages – rather than allocated to hedge funds.

Hintze was born in Shanghai but emigrated to Australia as a child when his Russian expat parents fled the Communist regime.

After earning degrees in physics and engineering in Sydney and serving a spell as an electrical design engineer and captain in the Australian Army, he started trading bonds and had stints at Salomon Brothers, Goldman Sachs and Credit Suisse First Boston.

From there, he spun out the Convertible and Quantitative Strategies business as CQS in 1999.

While he has spent the best part of four decades in London, where he is also an adviser to the Duchy of Cornwall, the Prince of Wales’ private estate, Hintze has also taken out his own hedge against the financial sector, compiling a huge rural industry business in Australia.

His MH Premium Farms business has net assets of $522m according to financial accounts lodged in late October with the corporate regulator.

MH Premium Farms has 16 lamb, beef, wool, wheat, cotton and sugar farms and stations across NSW, Victoria and Queensland.

Major flooding and a decline in livestock prices hit its operations in the 2023 financial year, the accounts said, leading to a $21.9m statutory net loss for the year and a $33.5m writedown in livestock carrying values.