Hedge fund giants are backing more external fund managers. Here's why smaller rivals are doing the opposite.

The hedge fund industry is experiencing a structural bifurcation in talent management strategy, with mega-funds and smaller platforms pursuing opposite approaches to portfolio manager retention and deployment. Large multistrategy platforms—including Millennium, Qube, and Schonfeld—have become increasingly reliant on external manager partnerships, deploying $55 billion to external fund managers according to data from With Intelligence. This reflects a deliberate shift toward sourcing trade ideas and alpha signals from smaller rivals rather than concentrating talent internally. Simultaneously, giant managers are tapping portfolio managers at competing smaller firms to fuel what industry participants describe as a "multibillion-dollar profit machine."

The divergence stems from what Millennium founder Izzy Englander characterized as a "talent bubble" in 2023, which has fundamentally altered power dynamics in favor of rank-and-file traders. Top portfolio managers now possess substantial negotiating leverage, using it to secure unprecedented autonomy, tax optimization through offshore office locations (Dubai, Puerto Rico), and the right to manage external capital alongside internal roles. Multistrategy platforms have accommodated these demands by building increasingly flexible organizational structures designed to retain talent without constraining individual trader autonomy.

In contrast, smaller platforms are adopting a counterintuitive strategy: consolidating portfolio management talent in-house while reducing external manager relationships. Adrian Brummer, partner at $12 billion Swedish alternative manager Brummer & Partners, outlined the logic in comments to Business Insider: internal portfolio managers operating within pod structures deliver greater operational efficiency, easier onboarding, and access to capacity-constrained strategies that external partnerships cannot provide. Brummer & Partners is actively expanding its internal PM roster from four to six or more during 2025, reversing the external-focused trend among larger competitors.

This two-tier approach reflects a competitive differentiation strategy. Smaller managers are positioning themselves as boutique alternatives to mega-fund "skill factories"—platforms that distribute capital across numerous external teams and dilute the influence of individual star traders. By offering autonomy, collaborative pod structures, and genuine partnership dynamics, smaller platforms are becoming attractive destinations for traders who feel constrained by scale-driven governance at giant multistrategy firms. The shift underscores a broader talent war in which portfolio managers maintain the upper hand, forcing both large and small platforms to reimagine organizational structures to compete for alpha-generating talent.