Meet Alister Hibbert, one of BlackRock Inc.’s best kept secrets.
He’s the money manager whose hedge fund has enriched the firm, its clients and himself with a near 370% gain over the past decade. Hibbert’s name is rarely mentioned within the walls of the world’s largest asset management firm, and many employees don’t even know who he is. That’s even after his fund single-handedly earned almost half of BlackRock’s record performance fees last year, according to Bloomberg calculations.
More than half a dozen investors and people who know him say London-based Hibbert, 51, has often been the firm’s highest paid employee globally. Last year alone, he earned a nine-figure sum more than triple the size of CEO Larry Fink’s $30 million payout, according to Bloomberg estimates and the people, who asked not to be identified because the details are private.
Hibbert runs the BlackRock Strategic Equity Hedge Fund, which has swelled to almost $9 billion from betting on and against U.S. and European companies. Since launching, it has more than tripled the gains of other long-short equity hedge funds, many of which now face an existential crisis as they trail well behind the longest bull market in history. It's a rare glimpse into the key roles some humans still play at a firm whose prescient move into index-tracking investments more than a decade ago has powered its rise into a behemoth overseeing almost $10 trillion.
BlackRock and Hibbert declined to comment. Details of his earnings, investing style, track record and history are based on his newsletters, a fund presentation sent to clients and interviews with people who know him or invest with him.
The pay gap between Hibbert and his powerful boss shows the might of hedge fund compensation in a mutual fund world: he earned BlackRock’s top payout despite managing a sliver of its assets. While Fink is still one of the highest paid CEOs in asset management and owns a stake in the firm that has made him a billionaire, hedge fund managers have traditionally ruled Wall Street when it comes to payouts. The top 15 hedge fund earners last year made an estimated $23.2 billion between them, according to a Bloomberg-compiled annual list.
The divide in compensation also demonstrates that BlackRock, known for a laser focus on costs and margins, understands that to stop top talent from jumping to rival managers such as Citadel or Point72 Asset Management—or starting funds themselves—it has to keep up with industry standards. Losing a fee machine like Hibbert could cripple the firm's effort to grow its hedge fund business.
Hibbert recently stepped down from managing two other large BlackRock money pools to focus on his far more lucrative hedge fund. Since arriving at the firm in 2008, he’d overseen the European Dynamic and Continental European Flexible funds, whose combined assets have since ballooned to more than $18 billion. It was in 2011 that he started the more sophisticated strategy with just $13 million, and after successful bets including long-time positions in Facebook Inc. and Alphabet Inc., it’s quietly become one of BlackRock’s biggest cash machines.
This year, Hibbert has barely made money after inflation fears weighed on his growth investments. He was late to respond last November when rising global vaccine levels sparked a selloff among firms perceived at risk as economies emerged from lockdowns. He was also caught out earlier this year by a short bet on Wm Morrison Supermarkets Plc, which surged amid a private equity bidding war. Clients say that Hibbert still believes that inflation will be transitory, even as growth stocks remain under pressure.
“Grandiose statements about investing in inflationary environments, which trail off far before detailing any practical investment conclusions save for the tiresome call to sell growth stocks, do not impress us at all,” he wrote to clients in July.
Investors are likely to be forgiving. Hibbert’s track record is a rare achievement in the $4 trillion hedge fund industry, where his peers have captured most of the market’s downside in recent years, but very little of the upside. When the S&P 500 tumbled 12% in March 2020 as the pandemic spread, 87% of equity hedge funds in a Bloomberg index lost money, with half declining by more than 10%. Hibbert was down just 0.5% that month.
Fed-up clients have pulled almost $70 billion from long-short equity hedge funds since the start of 2019, according to data from eVestment. In contrast, Hibbert’s fund isn’t taking new money and there’s a waiting list of investors eager to replace anyone that wants out, the people said.
Hibbert has worked alongside some of Britain’s best-known money managers in his more than two decade career, from famed investor Nick Train in the 1990s to fallen star stockpicker Neil Woodford. His previous employer was Scottish Widows Investment Partnership where he worked with Nigel Bolton, now co-chief investment officer of BlackRock’s fundamental equity group. In 2008, Hibbert and a team of colleagues followed Bolton to the investment giant.
“It was clear he had a very bright future in the industry thanks to his talent and dedication,” said veteran money manager Rory Powe, who worked with Hibbert at Invesco Ltd. and is now a portfolio manager at Man Group Plc.
Hibbert runs the Strategic Equity hedge fund with long time colleague Michael Constantis and three analysts, and has the final call on investments. Clients and acquaintances describe Hibbert as intellectually curious and an avid student of economic history as well as industries and companies—an equity long-short manager with a macro thinking hat. He’s also adept at clearly distilling vast amounts of data into big picture and fundamental views, they said. If he loses money, he will call immediately to explain his thinking, said an investor.
He is “incredibly capable and knowledgeable of the stocks he owns,” said Richard Philbin, chief investment officer of Wellian Investment Solutions, which invested clients’ capital in Hibbert’s long-only funds. He “has a very flexible investment style — not a dogmatic value or growth manager for instance, although it is fair to suggest there is a growth bias to his investment approach.”
The Strategic Equity fund returned 37% last year in its best annual performance yet. The gross gains were closer to 50% and would have earned around $480 million in estimated fees for BlackRock, according to a Bloomberg calculation based on the fund’s 20% incentive charge to clients. The firm earned a record $1.1 billion in performance fees in that period.
While the share of profits allocated to Hibbert and his team is unknown, people familiar with BlackRock's practices said the group would likely retain half of the fees. And industry standards would set Hibbert’s share at roughly 25% or about $120 million. Much of that would typically be deferred, and it's common for managers to reinvest a large portion of fees they earn in their own funds. If Hibbert did that since Strategic Equity’s launch in 2011, he could have made $350 million just from his hedge fund alone, according to Bloomberg calculations.
A recent earnings call hints at BlackRock’s outsized reliance on Hibbert’s fund, which was up just 2.3% at the end of September. Discussing third-quarter results earlier this month, Chief Financial Officer Gary Shedlin said firm-wide performance fees of $345 million were down from a year earlier after a decrease in revenue from a single hedge fund that delivered a “truly exceptional performance” in 2020.
Hibbert also began managing a global long-only equity portfolio last year, focusing on a smaller number of bets. The BlackRock Global Unconstrained Equity Fund has just over 300 million pounds ($412 million) of assets and is up 24% this year. It had 23 holdings as of Sept. 30.
Hibbert’s hedge fund approach is seen as a markedly cautious one, with investors even saying it has at times held back gains. The fund was European-focused in the first few years before boosting exposure to U.S. listed firms. He uses little leverage and typically holds between 150 and 200 long and short bets, a departure from the classic manager approach of concentrated, directional bets.
The strategy has led to annualized outperformance of 10% against the MSCI World Index since its launch—both on long and short bets, according to calculations by one of his investors. And Hibbert has surprised clients with his attention to detail on such a large number of stocks. One investor who has met with him several times said even questions about his smallest position will prompt a specific investing thesis, with Hibbert rattling off historical figures and details about the company.
As well as Facebook and Alphabet, payments company Mastercard Inc., Microsoft Corp., French luxury group LVMH and animal health company Zoetis Inc. were among Hibbert’s top 10 holdings at the end of August, according to the investor document seen by Bloomberg.
Potentially most important to investors is Hibbert’s track record during periods of stress. His small bets spread across many stocks helps ensure limited damage should they go wrong and resilience in challenging market conditions—a key reason why investors pay top fees to hedge funds.
They have reason to be satisfied. During the S&P 500’s worst ten months over the past decade, Hibbert underperformed just once and made money during half of them.
—With assistance from Silla Brush, Erik Schatzker, Annie Massa, Dinesh Nair and Tom Maloney.
This article was provided by Bloomberg News.
