Man who said no to Soros builds BlueCrest into hedge fund empire

Used $750 million in loans to hire equity traders

‘Good Trader’

If a trader loses 3 percent of the money he manages, BlueCrest cuts his capital allocation in half, the former employees said. The risk controls are one reason why BlueCrest has avoided calendar-year losses, they said. Platt owns 25 percent to 50 percent of the firm, while a BlueCrest Cayman Islands affiliate also owns 25 percent to 50 percent, according to filings with U.S. regulators.

“Mike is an extraordinarily good trader,” said Dodd, the BlueCrest CFO. “He’s managed to apply all those skills and instincts to become a very successful businessman. He has a reputation in the market for being tough but fair, which is exactly what is needed in our business.”

The British-born Platt started his financial career in 1991 at JPMorgan in New York in the same training class as Blythe Masters, who is known on Wall Street for her role in pioneering the market for credit-default swaps. After six months, Platt moved to the bank’s derivatives desk, where he traded interest- rate swaps. Platt said his group was making at least $500 million a year for JPMorgan by the mid-1990s, according to a January 2010 Bloomberg Markets magazine article.

‘Revolutionizing’ Trading

“He became a legend by kind of single-handedly revolutionizing the way JPMorgan traded interest rates,” Busson said. “With derivatives, he essentially found a new way to exploit price inefficiencies.”

Platt, an avid art collector who owns his own Bombardier jet, has a net worth of at least $1.2 billion, according to the Bloomberg Billionaires Index. In 2010, he relocated to Geneva from London after the U.K. government said it would raise taxes on top earners. Since the move, Platt has avoided spending time in BlueCrest’s London office, which might prompt tax authorities to accuse him of working in the U.K. capital, said people with knowledge of the matter.

BlueCrest declined to comment on Platt’s relocation and his tax affairs.

Trader Fired

He doesn’t shy away from a fight, said former BlueCrest traders and employees at other asset-management firms.

When foreign-exchange trader Jerome Ducanois complained that he was unfairly fired in 2006, Platt told him “BlueCrest had a lot more money to pay for a legal battle” than he did, Ducanois said in a 2007 lawsuit against the hedge-fund firm.

Ducanois said he gave up a job in Tokyo where he made more than $800,000 a year at Merrill Lynch & Co. to relocate to Newport Beach, California with BlueCrest on the promise that he would be paid about $1.7 million a year, he said. Instead, BlueCrest closed the office, triggering his termination, Ducanois said in his suit.

BlueCrest denied the claims. The parties resolved the dispute through mediation, Ducanois said in an interview, declining to discuss the terms. BlueCrest declined to comment.

BlueCrest Strategic

Platt’s tough negotiating stance has at times extended to the firm’s investors. F&C Asset Management Plc and a Man Group Plc fund-of-funds unit are among clients who’ve complained about being stuck for five years in a fund called BlueCrest Strategic, which holds investments that became illiquid when markets froze after the 2008 collapse of Lehman Brothers Holdings Inc., said two people with direct knowledge of the matter. The firm began winding it down in November 2008, selling liquid assets and returning more than half of Strategic’s capital to investors.

The biggest investment left in the $30 million fund is a loan to a geothermal drilling company, which BlueCrest has written down the value of this year, said the people, who asked not to be identified because Strategic is private. The firm has restricted clients from selling their Strategic stakes to other investors, said the people. Without an offer from BlueCrest to buy them out, the clients are trapped, the people said.

BlueCrest declined to comment on Strategic, as did spokesmen for F&C and Man Group.

It’s no surprise that investors would demand a way out of a hedge fund they’ve been stuck in since 2008, said Simon Lack, founder of investment firm SL Advisors LLC and the author of “The Hedge Fund Mirage: The Illusion of Big Money.”

“Mike Platt is a very smart businessman,” said Lack, who isn’t an investor in Strategic. “Mike Platt more than most people would say, ‘Didn’t you read the documents? The documents say I can do what I want, so therefore I’m completely within my rights.’”

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