For Billionaire Glenn Dubin, Rough Run Keeps Getting Rougher

NEW YORK (Capital Markets in Africa) – These are uneasy times for hedge fund billionaire Glenn Dubin.

His latest investment firm, the $1 billion Engineers Gate, has struggled to keep up with the market since its founding in 2014.

Then in August, a bombshell hit: the money manager and his wife were very publicly drawn into the scandal surrounding Jeffrey Epstein.

Now, a toxic mix of lackluster investment returns, a restive key client and unwanted notoriety has left Dubin working to contain the damage — at the very moment he’s trying to win over new investors, people familiar with the matter say.

Engineers Gate was to be a rousing encore to Dubin’s wildly lucrative run at Highbridge Capital Management.

Sensing big financial institutions would soon start investing in hedge funds directly, Dubin, 62, founded Highbridge in 1992. A dozen years later, he sold a majority stake to JPMorgan Chase & Co. The price: more than $1.3 billion.

That deal, it turned out, involved none other than Epstein, who was paid $15 million for his role introducing Dubin to a key bank executive. Yet as the world has since learned, the Dubin-Epstein connection went back even further: over the years Epstein collected an astonishing number of famous, rich and powerful acquaintances, including Dubin and his wife, Eva. She dated Epstein in the early 1980s, and the couple’s children called him uncle. They kept up a friendship even after Epstein was first accused of preying on young women.

The day before Epstein hanged himself in his Manhattan jail cell, allegations involving Glenn Dubin from a previously sealed deposition hit the headlines. The most startling: a woman who said she had been Epstein’s “sex slave” while a teenager claimed she’d been forced into an encounter with Dubin.

The Dubins said they were horrified. They promptly denounced the allegations as “demonstrably false.” To prove it, their lawyers marshaled documentation ranging from flight records to credit card receipts. They provided their evidence to business associates and boards. Bloomberg News also reviewed records provided by the Dubins’ lawyers.

“Glenn and Eva Dubin categorically reject the allegations against them in the recently unsealed court documents, and the evidence they provided refuting the allegations speaks for itself,” said a spokeswoman for the couple.

The allegation, made in a sworn deposition, was from a 2015 civil defamation case that was later settled and in which neither of the Dubins was a defendant. He was one of a number of high-profile men, including the U.K.’s Prince Andrew and law professor Alan Dershowitz, similarly accused. Both have also denied the accusations.

Still, the taint lingers. A quick Google search of “Glenn Dubin’’ yields page after page of media reports about Epstein.

And so Dubin is coping with a tabloid-style distraction, while trying to raise as much as $500 million from a couple of investors for Engineers Gate.

Even before the Dubins were publicly drawn into the Epstein scandal, questions were hovering around the performance of Dubin’s young firm, which takes its name from the ornate stone entrance to New York’s Central Park at East 90th Street.

Engineers Gate has made money every year since its founding in 2014, according to a person familiar with the firm. The fund has even generated double-digit returns consistently, but that’s before accounting for fees and expenses. After stripping out these costs — and building a quant strategy is expensive — annualized performance has been 5%, according to people with knowledge of the returns.

“We are deeply proud of all we have accomplished at Engineer’s Gate over the past five years,” according to a representative for Glenn Dubin. “We have created a world-class team and built a valuable trading and research platform for quantitative equity and futures strategies. The private firm, which has five sophisticated investors, is currently at peak AUM, headcount and performance high-water mark.”

In June, Engineers Gate pitched investors at a high-profile Goldman Sachs event at Yankee Stadium. The annual gathering, a fixture on Wall Street’s calendar, is akin to hedge fund speed-dating: prospective clients move from one short presentation to another, sizing up the funds and their strategies.

Engineers Gate, however, shied away from providing key details, including specific performance data, according to a person who attended the presentation. Prospective clients were required to return documents before leaving the room. Dubin’s team met with clients at a similar Morgan Stanley event in mid-September.

One big client is already disappointed. The Canada Pension Plan Investment Board, one of just five investors, has grown frustrated with the fund’s low returns and is scrutinizing its investment, according to people familiar with the matter.

The Canadian pension fund declined to comment.

Engineers Gate isn’t Dubin’s only game. After exiting Highbridge in 2013, he formed a family office that now occupies a floor in Manhattan’s sleek new Hudson Yards. His business interests include venture capital and biotech. He has stakes in two small companies, C4 Therapeutics and Frequency Therapeutics, and is also a seed investor in Commodore Capital, a biopharma health-care hedge fund. He’s also the lead shareholder and co-chairman of the trading house Castleton Commodities International.

Yet his big bet is Engineers Gate. Dubin set out to apply his multi-manager approach to computer-driven strategies. The idea was to build a platform that would manage Dubin’s money and that of a select group of institutions.

Building a quant fund can take at least five years and tens of millions of dollars of investment. The most successful ones, such as Renaissance Technologies, Two Sigma Investments, and D.E. Shaw & Co., were founded by people with PhDs in mathematics or computer science. Dubin graduated with a degree in economics.

Engineers Gate has suffered its fair share of growing pains.

Matt Cushman, one of the original four portfolio managers, left in 2017 after trying to build an equity market-making business that was later abandoned because it couldn’t scale up. Another early employee, Ricky Shi, jumped to rival Schonfeld Strategic Advisors earlier this year. He had been building a team of more junior quants for Dubin, who are still there.

A key figure is Stephen Owen, the only remaining portfolio manager who has been at Engineers Gate since inception. He has one of the largest portfolios at the firm and was named chief architect in mid-2017. The firm now has 14 portfolio managers.

The Dubins, for their part, are still navigating the Epstein affair. Friends have communicated support privately. Few have been willing to speak up publicly.

The couple, prominent figures on the New York’s social scene and charity circuit, have maintained their seats on various boards. Glenn Dubin founded one of New York’s most notable Wall Street philanthropies, the Robin Hood Foundation, with fellow hedge-fund billionaire Paul Tudor Jones. Robin Hood, in a statement, said it values all 40 of its trustees; it declined to comment on Dubin.

Meantime, Mount Sinai Health System, where the Dubins are both trustees and where Eva Dubin founded the Dubin Breast Center, praised the couple for their generosity and said it would “monitor the situation as it unfolds.’’

So, too, will current and potential Engineers Gate investors.

“For the Dubins, and anyone else who has had their name tied to Epstein, it has got to be a period of excruciating anxiety,” said Eric Dezenhall, a crisis-management adviser.

Source: Bloomberg Business News