The Quiet

Ambition of

Jacob Gottlieb
Doctor-turned-hedge-fund-founder
Jacob Gottlieb wants to transform his health-care-focused
firm into a multistrategy manager to rival the greats.
But can he pull it off?

By Imogen Rose-Smith
photographs by jennifer altman

i n s t i t u t i o n a l i n v e s t o r . c o m j uly / a u g u s t 2 012
hedge funds

Gottlieb during a
reflective moment at
Visiums swank new
Midtown Manhattan
headquarters
 F
For most hedge fund managers, poker is a
high-stakes, high-risk opportunity to show off their smarts. For
Jacob Gottlieb the game is something altogether different.
Gottlieb, 40, gathers once a month in Manhattan with a small
group of fellow hedge fund managers for a poker game thats
less about cutthroat competition and more about good friends
catching up over a leisurely evening of cards. Gottlieb and his
poker buddies, who include Marc Lasry and Boaz Weinstein,
meet in one anothers homes for loose, informal games that last
for hours and include a rotating cast of drop-in players.
Its a way for friends to get together, saysWeinstein, founder
and CIO of $6billion Saba Capital Management. Five or six
hours pass in a matter of minutes. Chips get moved around;
hands are played. Nobody wins too much; nobody loses too
much.There is a sense of camaraderie, and we talk.
What these players like to talk about is business specifically,
the business of building and running a hedge fund firm. At 52,
Lasry, co-founder of $13.1billion Avenue Capital Group and
a major Democratic fundraiser who maintains close ties to the
Clintons, is a generation older than the rest of the players and
often acts as their sounding board. He says he enjoys talking
to them, sometimes offering advice from his own experiences.
The topic of business-building is something of an obsession
for Gottlieb, who trained as a doctor before starting a career in
finance. He founded New Yorkbased Visium Asset Manage-
Visium president Jason Huemer is instrumental in the expansion
ment in 2005. The firm, which today manages $3.5billion in
assets, was built around Gottliebs considerable expertise in
health care stocks, honed over years of experience as a portfolio Gottlieb has allocated significant resources to hiring top investment
manager at various investment firms. Its flagship product, a long- and operations talent to make his plan work. In December 2009 he
short equity health care fund called theVisium Balanced Fund, has recruited as president Jason Huemer, a veteran of multistrategy firm
some $2.4billion in assets and has generated an annualized return SAC Capital Advisors, and he has brought on experienced portfolio
of 15.6 percent since inception. managers in some cases entire teams with a range of skills to
Many aspiring hedge fund managers would be thrilled with that expand the firm well beyond its original health care portfolio.
level of success. But Gottlieb has far bigger plans for his firm. He Still, Gottlieb has struggled to attract assets for Visiums multi-
wants to transformVisium into a multiproduct, multistrategy pow- strategy Global Fund.To date, the fund manages just $200million,
erhouse to rival some of the most successful managers in the history half of which is the firms own capital.
of the hedge fund industry. He has spent the past few years quietly Gottlieb is not the only up-and-coming hedge fund manager look-
laying the groundwork to realize his ambitious goal. ing to build a successful firm.Take his poker buddies. In addition to
Were committed to running a very high-quality, high-integrity elder statesman Lasry, who owns the groups longest-running firm
firm, says Gottlieb. Doing things the right way is integral to our by far, theresWeinstein, who founded NewYorkbased Saba in 2009
philosophy and our culture, and weve built a strong firm for the long and recently gained renown for betting against the so-called London
term that makes smart investments. Whale, a trader in JPMorgan Chase & Co.s U.K. offices whose trades
To achieve his dream, Gottlieb will have his work cut out for him. cost the bank at least $2billion (with some news outlets reporting
Multistrategy firms, in which a pool of capital is allocated to different that losses could reach $9billion). Peter Muller, another player,
traders and moved around opportunistically, have become some is one of the most successful proprietary traders in the history of
of the most successful businesses in the hedge fund industry, but investment bank Morgan Stanley and is now in the process of starting
the majority of managers that have tried this approach have failed. his own firm. Neil Chriss, the fifth regular in the group, is a quant

j uly / a u g u s t 2 012 i n s t i t u t i o n a l i n v e s t o r . c o m
hedge funds
who previously worked for SAC Capital and founded Hutchin Hill
Capital, also in New York, with seed money from hedge fund firm
RenaissanceTechnologies Corp.s legendary founder, James Simons.
Managers like Gottlieb may benefit from tailwinds that are help-
ing the multistrategy model. Institutional investors are pouring more
money than ever into the hedge fund industry, and they prefer larger
firms that can handle the types of big checks these organizations
need to write. At the same time, some of these investors have become
skeptical of funds of hedge funds, which charge an additional layer
of management and performance fees on top of the typical hedge
fund fees and which recently have underperformed. As a result,
some investors have pulled money from funds of funds and turned
instead to multistrategy managers, which like funds of funds offer
diversified sources of returns. Another advantage:When a particular
strategy falls out of favor, multistrategy managers can take money out
of that strategy instantly. It can take months for a fund-of-funds firm
to redeem from a manager whose strategy is suddenly losing money.
But the multistrategy model is not without its challenges. In the
past some managers have struggled with risk management, relying
too heavily on one star trader or one big bet. Others have grappled
with the problem of retaining talented portfolio managers and
questions over who really provides the value to the fund the man-
agement or the traders. Lack of transparency can also be a concern.
Recently, some firms have demonstrated just how hard it is to
establish, and run, a successful multistrategy firm. Some high-profile
launches have failed despite being well capitalized, while other well-
known funds have gotten caught up in insider trading schemes.
FrontPoint Partners, Galleon Group and Level Global Investors are
among the most obvious examples of once-high-flying multistrategy
hedge fund firms undone by such scandals.
The issue of how to pay top traders is another challenge for mul-
tistrategy managers. Some firms, such as Citadel and Millennium
Management, have lured talent away from the banks by charging
pass-through fees for the industry, thereby giving themselves flexibility
to pay top traders more competitively. But these firms investors were
willing to pay such fees because of the managers long track records and
their reputations as moneymakers. As a relative newcomer, albeit one
with strong performance,Visium has to compete with these firms for
talent despite charging the 2 percent management fee and 20 percent
performance fee that are standard for hedge funds.
Despite these impediments,Visium has made quality hires. One of
the most important was Huemer. Jason and I both live and breathe
investing and the industry, says Gottlieb. This is what we do. And
weve learned from the successes and failures of others.
Visium has also attracted some talented portfolio managers,
including credit and event-driven specialist Bradley Levie and his
entire firm, Catalyst Investment Management, and 17-year industry
veteran Robert Kim, who has worked at several top hedge fund firms.
Still, although Visiums investors admire Gottlieb as a health care
fund manager, some are concerned that he will struggle to transform
Visium into a larger, more multifaceted firm and will take his eye off the
Visium Balanced health care fund in the process, hurting returns.It is
something we worry about, says a fund-of-funds manager who invests
inVisiums Balanced Fund but likely will not invest in the Global Fund.
Jacob Walthour, a managing director and consultant in the New
York office of Marina del Rey, Californiabased investment advisory
i n s t i t u t i o n a l i n v e s t o r . c o m j uly / a u g u s t 2 012
firm Cliffwater, which specializes in advising institutional investors
on hedge funds, says he initially worried that the buildout would
take Gottliebs focus away from the Balanced Fund. But Gottlieb
was able to convince him otherwise.
Jake understands that the goose that lays the golden egg is the
Balanced Fund, saysWalthour, noting that Gottlieb closed the fund
to new investments at the $2billion mark, when he could have raised
much more.That is why he has been so disciplined about its growth.
Born in Brooklyn, New York, Gottlieb is the
elder of two sons. His parents both immigrated to the U.S. from
Poland in the 1960s. His father is an economist who teaches at the
City University of New York; his mother is a pediatrician. Perhaps
as a result, for a long time Gottlieb felt drawn to both finance and
medicine. He made his first trades in baseball cards; in seventh grade
he won a stock-picking contest at school, and his father set up a trad-
ing account for him. He and a friend also started a business selling
sodas and snacks to golfers at the local golf course.
Gottlieb graduated magna cum laude from Brown University with
a BA in economics and went on to earn a medical degree from New
York University. He completed an internship in internal medicine
at St. Vincents Hospital in New York, but he ultimately was more
attracted to finance and started looking for a job on Wall Street. He
landed at Sanford C. Bernstein & Co. in 1998 as a buy-side analyst
covering global health care.
Thoughtful and soft-spoken in person, Gottlieb says there are
many similarities between being a fund manager and being a sur-
geon. Essentially, a doctor is a risk manager, he says. Doctors tend
to be very good at planning, thinking through issues methodically
and cutting off risks before a problem arises, Gottlieb adds. In
medicine you have to adhere to a system and a process so you can
understand what is going on and take appropriate action, he says.
While Gottlieb was learning his trade on Wall Street, a Russian-
For him to get where he is
was ten times harder. He didnt
have the advantages that other
people had. He is succeeding
based on his raw ability.
Marc Lasry, Avenue Capital Group
born trader named Dmitry Balyasny was building a star reputation at
Schonfeld Group Holdings, a privately held day trading and invest-
ment firm run by Steven Schonfeld and based in Jericho, NewYork.
In 2001, Balyasny started looking for a health care trader to add
to his group. A mutual acquaintance recommended Gottlieb, who
by then was working as a health care portfolio manager at NewYork
hedge fund firm Merlin Biomed Group. Impressed, Balyasny hired
Gottlieb, and when he left to form his own firm the next year, he took
Gottlieb with him.
At Balyasny Asset Management, a multistrategy hedge fund firm
based in Chicago, Gottlieb built up both his team and his reputa-
tion. His health care portfolio gained 11.25 percent in 2002, 48.57
 hedge funds

percent in 2003 and 19.16 percent in 2004, making him

the top earner at the firm. By the end of 2004, BAMs
assets stood at about $500million, but Gottlieb felt he
could manage more money. He and his team left, and,
with about $300million in seed capital from BAM, they
startedVisium.
Gottliebs basic investing approach has not changed
much since his BAM days. It combines an intense focus
on research with a rigorous review process for security
selection. Gottlieb sits down with individual portfolio
managers to discuss how best to execute a trade, making
sure the manager has considered all possible angles and
uncovered any weaknesses in the idea.Then he and the
manager evaluate the investment instruments that can
be used to structure the trade in an optimal way.
Visiums 27 health care investment professionals
many of whom have experience in the health care
industry and some of whom have medical backgrounds
rely on a homegrown network of industry contacts,
doctors, consultants and experts to gather information.
In 2009, during the heath care reform debate, the firm
sent at least two investment professionals a week to
Washington to monitor the situation; Visium recently
sent investment staffers to the Supreme Court hearing
on the Affordable Care Act.
Every week Visiums analysts and portfolio manag-
ers obtain a report of how many prescriptions were
filled at various pharmacies around the world and then
comb through the data, cleaning up any inaccuracies or
errors. The process is labor-intensive, but it makes the Ryan Ogg, Visium partner and biotechnology portfolio co-head, has worked
information much more actionable. I dont think a lot with Gottlieb since November 2002.
of firms could afford to have a few people doing that,
says one investor.
Ryan Ogg, who joined Gottlieb in November 2002 from the Visiums Balanced Fund returned 14.19 percent in 2006 and
equity research department at Dresdner Kleinwort, works as a 17.05 percent in 2007; by the end of that year, the fund had $2bil-
partner and biotechnology portfolio head for Visium. Ogg, who lion in assets under management and a staff of more than 40. Like
holds MS degrees in biochemistry and molecular biology from the plenty of hedge fund firms, however,Visium struggled in the difficult
University of Colorado, says that in addition to Visiums in-depth markets of 2008.The Balanced Fund lost 13.95 percent, Gottliebs
research process, the firm also focuses on modeling and analysis. first down year with the fund. Because of those losses, combined
Investors praise Gottliebs creative use of options and derivatives
to put on a trade. Rather than just buying or selling a security, he will
look at the best and most economical way to structure a trade, often Jake understands that the
using derivatives. He looks for anomalies and ways to trade around goose that lays the golden egg
an event, says an investment consultant. He is a little bit unique in
is the Balanced Fund.
that respect. In health care where the outcomes of clinical trials or
Jacob Walthour, Cliffwater
a Food and Drug Administration decision can prove critical such
an approach makes a good deal of intuitive sense.
Ogg is just one of many on the Balanced Fund investing team with redemptions as investors sought liquidity, the fund shrank to
who have been with Gottlieb for close to a decade. That is very $1.3billion in assets.
rare in this industry, says Kim, who also serves as director of Still, Gottlieb navigated 2008 better than most managers.
research for the Global Fund. He adds that this stability was one of The average hedge fund lost 19.03 percent in 2008, according to
the things that impressed him aboutVisium. Kim, who has worked Chicago-based Hedge Fund Research, and the Standard & Poors
as a portfolio manager at SAC Capital, Soros Fund Management 500 Index plunged 38.49 percent that year. Overall hedge fund
and Millennium Management, and as head of proprietary trading assets dropped from a high of more than $2trillion in the first six
for Royal Bank of Canada, joined Visium in May 2010 to launch a months of 2008 to $1.4trillion six months later, according to HFR.
tax-efficient fund. The hedge fund industry underwent retrenchment and consolida-

j uly / a u g u s t 2 012 i n s t i t u t i o n a l i n v e s t o r . c o m

Hedge fund industry veteran Robert Kim
tion: HFR registered 1,471 hedge fund liquidations in 2008 and a
further 1,023 in 2009.
Amid the chaos, Gottlieb spied opportunity.The time had come,
he reasoned, to turn Visium into the multistrategy manager he had
always wanted the firm to be. In fact, Visium had already started a
multistrategy fund using internal seed capital in late 2007. It survived
2008 well, returning 4.5 percent, and performed impressively in
2009, gaining 113.34 percent. At that point, Gottlieb prepared to
open the fund to outside investors. He closed his main health care
fund which had a strong 2009 and 2010, returning 22 percent
and 24.45 percent, respectively to new money and hired Huemer
as president.
At SAC, which Huemer joined in 2005 from Merrill Lynch & Co.,
the former financial journalist had helped raise more than $6billion in
capital. He left in January 2009 to join a new hedge fund,Atlas Capital
Management, as its CEO. After Atlas shut down, Huemer served as
a consultant to several hedge funds, includingVisium.
Soon after Huemer joined Visium, he and Gottlieb started look-
ing for talented portfolio managers to add to their team. They also
explored the strengths and weaknesses of the multistrategy model,
looking to the industry for examples of best and worst practices.They
wanted to do things the right way.
In 2011, a challenging year for many hedge fund managers,Visi-
ums Balanced Fund returned 2.07 percent; its multistrategy Global
i n s t i t u t i o n a l i n v e s t o r . c o m j uly / a u g u s t 2 012
Fund gained 1.75 percent.This year the health care fund
returned 6 percent through June, while the Global Fund
was up 9.5 percent. Almost all of the investors who left
Visium in 2008 and its aftermath have returned.
Hiring is an important part of success
or failure at any multistrategy firm. Some of the indus-
trys best-known firms including SAC, Odyssey
Partners and Tiger Management Corp. have used
a psychiatric evaluation as part of the hiring process.
Huemer, who worked closely with SACs own staff
psychiatrist, the late Ari Kiev, had started using an
adapted version of the test employed by Odyssey.When
he joinedVisium, he brought that process with him.The
test focuses on areas such as leadership, problem solv-
ing and decision making, personal organization, time
management and interpersonal dynamics.
We have gotten good at the hiring process because
we have done a lot of it, and you learn along the way,
says Huemer. Though the psychiatric test adds a layer
of standardized process that is valuable, the wayVisium
uses the results varies from situation to situation. It
does not end with the test, Huemer notes. If a test
raises real concerns, we will reengage and spend time
with the candidate, he explains. What the test shows
you is tendencies, not outcomes. A candidate who is
weak on self-structure, for example, might compensate
in other ways.
One group that successfully got through Visiums
review process was Catalyst Investment Management.
Based in New York, Catalyst was founded in 1995 to
manage money for a wealthy international family. Cata-
lyst ran a credit and special-situations fund, and the team had exper-
tise in distressed credit and restructuring. Catalyst partner Levie and
Huemer had known each other for close to a decade when Huemer
called Levie to ask for his advice because Visium was looking for an
event-driven team.Within a matter of days, they had the framework
for a deal that would bring the entirety of Catalyst over to Visium;
the team joined in June 2011.
Kim, who joined the Visium team in May 2010, was another
significant hire. From 2004 to late 2005, he worked as the CIO of his
own firm, but he says he did not enjoy the experience. I really under-
estimated the business aspect of running the firm, he says. What I
do well is build out an investment strategy. Kim joined Millennium,
and when he left that firm in 2009, he was not interested in starting
up his own firm again.When Gottlieb and Huemer approached him
about working forVisium, he was intrigued.
When it comes to building its multistrategy team,Visium has been
cautious. Today the firm has 17 investment professionals working
exclusively for the Global Fund. Recent hires include Stayton Creech,
previously a portfolio manager with FrontPoint; David Ferrara, a
former senior analyst covering industrials for Hunter Global Investors;
and exD.E. Shaw Group energy portfolio manager Fauzia Rashid.
They and the rest of theVisium investment team apply the same rigor-
ous investment approach the firm uses in the health care fund to the
multistrategy product.

The scale ofVisiums ambition is evident
in the firms new office space. Visiums old
Midtown Manhattan offices offered neither
attractive views nor a prestigious address,
but in April the firm moved into new digs,
at 888 Seventh Avenue. Located on the 21st
and 22nd floors of the 46-story building,
Visiums offices boast an open-plan layout
with sweeping views of Central Park.
The offices are undoubtedly an upgrade,
with plenty of room to expand if Visium
grows according to plan. Tellingly, the new
offices are in what is considered one of the
premier hedge fund buildings in NewYork,
with an A-list roster of tenants: Pershing
Square Capital Management, Soros Fund
Management andTPG-Axon Management.
A former tenant of Visiums new build-
ing, however, serves as an example of why
people raise questions about multistrategy
funds, and of the challenges in running
a business with a so-called eat-what-
One of the criteria for making partner
is that you have to work well and play
well with others.
Jacob Gottlieb, Visium Asset Management
you-kill culture that rewards individual
performance rather than teamwork. On
November 22, 2010, the Federal Bureau
of Investigation raided the New York and
Connecticut offices of Level Global, a
multistrategy hedge fund manager and
tenant of 888 Seventh Avenue, along with
the offices of two other hedge fund firms.
The raids were part of an investigation
into insider trading at hedge funds. Level
Global, responding to a tide of redemption
requests, returned all money to its inves-
tors and shut its doors; eventually, firm co-
Reprinted from the July/August 2012 issue of Institutional Investor Magazine. Copyright 2012 by Institutional Investor Magazine. All rights reserved.
founder Anthony Chiasson was arrested.
Level Global is not the only multistrat-
egy hedge fund firm undone by probes
into insider trading post-2008. The most
dramatic example is Galleon, which at its
height was a $7billion multistrategy firm
with an expertise in technology stocks. Its
co-founder Raj Rajaratnam was found guilty
on 14 counts of securities fraud in May 2011
and sentenced to 11 years in prison. Front-
Point was also caught up in an insider trading
scandal, related to its health care fund, and
has now all but shut down.
The multistrategy model is obviously vul-
nerable to ethical transgressions. Gottlieb,
however, says that with the right monitoring
and processes in place, firms can avoid these
problems. Hiring the right people is critical.
It is hard to pass on that big moneymaker
who is a jerk, Huemer admits, but he says
Visium does just that. Irrespective of how
talented portfolio managers are, they wont
get hired if they dont pass that personality
test. The same is true of progressing up the
ranks.One of the criteria for making partner
is that you have to work well and play well
with others, Gottlieb says.
Kim appreciates the collaborative cul-
ture atVisium. He also values the systematic
nature of the investment approach. We are
very focused on the process, and that allows
Visium to look across a lot of different strate-
gies, he says.
Levie agrees with Kims assessment of
Visiums culture. It is not a shark tank, he
For more information call (212) 224-3675
hedge funds
says. Ogg adds that Gottlieb is a very level-
headed boss: Jake is very analytical and very
consistent. He does not get too high when
things are going well, and he does not get too
low when things are going poorly.
Lasry arguably one of the most suc-
cessful business-builders in the hedge fund
industry, having sold a 20 percent stake in
his firm to Morgan Stanley has confi-
dence in Gottlieb. I think he will be able
to build a business because he has that skill
set, says Lasry. But he will also be able to
grow the business because he knows how to
generate returns.
Gottliebs success to date is all the more
impressive, says Lasry, because in the hedge
fund world he is something of an outsider.
He did not have the contacts and network
that many successful hedge fund managers
including some of those in his poker
circle used to build their businesses. He
doesnt boast a white-shoe hedge fund
rsum, burnished by stints at Goldman
Sachs Group or Tiger.
For him to get where he is was ten times
harder, Lasry says. He didnt have the
advantages that other people had. He is
succeeding based on his raw ability. As you
spend more time with him, you realize how
much smarter he is than other managers.
What a lot of managers sell is pedigree; what
Jake brings is raw talent.
Recently, Gottlieb took his friend and
poker buddy Chriss to see the new Visium
offices not to show off, but because he
was genuinely pleased with the new space.As
they stood in the conference room, looking
out over Central Parks manicured lawns and
wooded hills, they talked about the growing
complexity of the hedge fund industry. After
all, Gottlieb and his fellow poker players
want the same thing: to build good busi-
nesses that will last.
The statements contained within this article reflect the views and opinions of the author and the principals of Visium
Asset Management. No part of this document contains an opinion or analysis of the Altegris companies or any
Altegris
The investment
statements product.
contained within this article reflect the views and opinions of the author and the principals of Visium
Asset Management. No part of this document contains an opinion or analysis of the Altegris companies or any
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Altegris is being product.
investment provided for informational purposes only and should not be construed as investment advice of
any kind and does not contain a recommendation to buy or sell any specific securities. The comments and analysis
herein
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Reprinted from the July/August 2012 issue of Institutional Investor Magazine. Used with permission. All Rights Reserved.

Reprinted from the July/August 2012 issue of Institutional Investor Magazine. Used with permission. All Rights Reserved.