Hedge fund Millennium's big US portfolio manager and the employment contract dispute

Adam Grunfeld seems to be a big deal at hedge fund Millennium in New York City. Since April, Grunfeld has been Millennium's head of portfolio manager (PM) development and strategic initiatives for the fixed income unit. Prior to that, he was a senior portfolio manager at Millennium for four and a half years. He's also done stints at Element, Tudor and Balyasny Asset Management.

Earlier this year, though, Grunfeld thought about leaving Millennium. He had these thoughts in January, after a headhunter introduced him to rival hedge fund, Schonfeld Strategic Advisors. For a few brief months, Grunfeld had his head turned. He even engaged an attorney and signed an employment agreement committing to join Schonfeld in July 2027 after exiting Millennium as expeditiously as possible. But then Grunfeld changed his mind. And Schonfeld has not taken kindly to that. 

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As we reported last month, Schonfeld has filed a lawsuit requesting that Grunfeld pay $11m in damages. In its court filing, Schonfeld says it's not only lost the profits that Grunfeld would have generated had he joined, but that it's lost opportunities to hire other candidates. Schonfeld says it spent a lot of money trying to hire Grunfeld, including "internal personnel time, third-party costs, recruiting fees, investment and risk due-diligence expenses, legal fees, and background investigation costs." It wants all of this to be repaid in the $11m, plus extra for the fact that it says Grunfeld disclosed details of his employment negotiations to Millennium, in violation of what Schonfeld claims was its confidentiality agreement. 

Grunfeld is having none of this. Still happily at Millennium, Grunfeld made his own filing last week asking for the case to be thrown out by the New York Court. He says he reconsidered his decision to leave Millennium just 15 days after signing Schonfeld's employment agreement and that the $11m is "grossly disproportionate" to Schonfeld's costs. Instead, Grunfeld says the $11m is equivalent to a signing bonus (which he hasn't been paid) that would have locked him in at Schonfeld for three years. If he'd joined Schonfeld, Grunfeld's filing says he would have received the $11m in his first month and would have been obliged to repay it if he'd left again within three years. But because he didn't join Schonfeld, Grunfeld didn't get the $11m and therefore he says he can't be expected to pay it back. Effectively, Grunfeld says Schonfeld wants to charge him the same amount for changing his mind two weeks after signing when no money was exchanged as it would if Schonfeld had actually paid him the $11m and then he'd left after that. 

Part of the problem is that Schonfeld really likes Grunfeld. In its own filing, Schonfeld says Grunfeld is a "highly specialized portfolio manager" and that he has "unique investment judgment, strategy design, and capital deployment expertise developed over many years." Few other portfolio managers can replicate Grunfeld's ability, enthuses Schonfeld. If only he'd joined, Schonfeld says Grunfeld wouldn't have been any standard portfolio manager there. It says the two were contemplating a "multi-year relationship" in which Grunfeld would deploy "increasing amounts of capital" and "play a meaningful role in expanding Schonfeld’s investment capabilities and management bench."

Being jilted is presumably therefore painful, particularly as Grunfeld now seems to be developing the PM bench back at Millennium instead. But Grunfeld in turn says that Schonfeld's claims don't make any sense. - If he's really such a rare talent, Grunfeld says Schonfeld can't claim that it's also suffered from not using its time to hire someone else instead. He says that Schonfeld didn't have anyone else lined up and that it's simply claiming damages for losing "phantom candidates" and is trying to "coerce" him into going there. Schonfeld would clearly disagree. 

Lastly, Grunfeld says Schonfeld can't claim liquidated damages for the lost profits he might have generated if only he'd arrived. Grunfeld says he would have had to generate more than $22m to create $11m in lost profits for Schonfeld, which also seems to suggest he'd negotiated an unusually generous 50% cut of his profits for himself...

Both Schonfeld and Grunfeld declined to comment for this article. Maybe Schonfeld would still like Grunfeld to change his mind? Maybe not. Schonfeld thinks Grunfeld used its job offer to negotiate a new and superior position at Millennium. If he'd actually joined Schonfeld as planned, then Schonfeld says $11m would have been "only a fraction" of his anticipated compensation there. However this case ends, there's clearly an interesting opening available for someone else.

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