A legal battle between rival multi-manager hedge fund firms has intensified after Millennium Management portfolio manager Adam Grunfeld asked a New York court to dismiss claims brought against him by Schonfeld Strategic Advisors over a failed recruitment agreement, according to a report by Bloomberg.
In a filing submitted on Friday, Grunfeld argued that Schonfeld is improperly attempting to enforce an $11m payment provision following his decision not to join the firm, characterising the lawsuit as an effort to pressure him into completing the move.
The dispute stems from allegations by Schonfeld that Grunfeld breached a recruitment agreement signed in March after subsequently deciding to remain at Millennium. Schonfeld claims the agreement required Grunfeld to pay $11m if he withdrew from the arrangement prior to joining the firm.
Grunfeld, however, contends that the amount in question represented a prospective signing payment that was never received and therefore cannot legitimately be reclaimed. His legal team argues that Schonfeld is attempting to reinterpret a clawback provision in a manner that bears little relationship to the circumstances of the case.
According to the court filing, the hedge fund manager’s position is that the agreement would impose the same financial penalty regardless of whether he joined the firm, received compensation and later departed, or withdrew before commencing employment and before receiving any remuneration.
The case has become another prominent example of the increasingly contentious competition for investment talent across the hedge fund industry. Disputes involving so-called “gazumping” — where a sought-after hire is persuaded to abandon a previously agreed move in favour of a competing offer — have become more common as firms compete aggressively for portfolio managers with strong performance records.
Schonfeld has argued that the $11m figure reflects both the costs associated with recruiting Grunfeld and the opportunity cost of passing on other candidates pursuing similar investment strategies.
Grunfeld’s filing challenges that rationale, asserting that the damages sought are disproportionate and unsupported by any clear connection to actual losses. The filing further argues that the recruitment-related costs cited by Schonfeld were not specifically incorporated into the relevant contractual provisions.
In addition to the payment dispute, Schonfeld has accused Grunfeld of breaching confidentiality obligations, alleging he used information connected to the recruitment process to negotiate improved terms with Millennium.
Grunfeld rejects those allegations, maintaining that the confidentiality restrictions cited by Schonfeld would only apply to information obtained through employment at the firm, which never occurred. His filing also argues that preventing an employee from discussing the terms of their own employment agreement would run counter to principles supporting labour mobility.
Before joining Millennium in 2021, Grunfeld held senior investment roles at Element Capital Management, the macro-focused hedge fund founded by Jeff Talpins. Earlier in his career, he managed global rates strategies at the investment firm established by Paul Tudor Jones and also worked at Balyasny Asset Management and Comac Capital.
The case, Schonfeld Strategic Advisors LLC v Grunfeld, is being heard in the New York State Supreme Court.
