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Head Of Investments For $700 Million Hedge Fund Leaves Unexpectedly

The Barnegat Fund has lost its head trader and chief operating officer, Derek Barnes, who left last month to spend more time with his family, BuzzFeed has learned.

Posted on August 30, 2013, at 11:19 a.m. ET

Rick Wilking / Reuters

BuzzFeed has obtained a letter from Derek Barnes, the head trader and COO of the $700 million Barnegat Fund, detailing his quick exit from the hedge fund last month.

Barnes left the fund after nearly eight years on July 26, stating he wanted to spend more time with his family.

But Barnes also had some choice words for the management of Hoboken, N.J.-based fixed income specialist Barnegat, which was founded by Bob Treue and saw a period of triple digit growth following the financial crisis. In particular, Barnes complained that the structure of the firm did not foster teamwork.

"I have never genuinely aspired to be a portfolio manager in an individual / silo format," Barnes wrote, "and unfortunately, the incentive structure at Barnegat did not recognize my contributions that were not clearly tied to a stream of revenue so it is time for me to move on and search for a firm with a strong team culture."

The full text of the letter and a screenshot is below. It's unclear where Barnes will land, but he sought suggestions on his future firm from email recipients.

Good afternoon,

I apologize for the somewhat generic nature of this note, but this is my attempt to inform as many of my friends and colleagues as possible about an important recent event. After nearly eight years together, The Barnegat Fund and I parted ways on 26 July 2013. My family and I will take advantage of this opportunity to enjoy more vacation time together before school begins, and I will be fully prepared to search for an exciting new career opportunity starting in September.

As you may know, I have accrued a unique and valuable body of experience as a Head Trader & COO/Operations Manager hybrid. My skillset and personality can be described as having a demonstrable instinct for innovation, knowledge about market structure, motivation to gain exposure to many asset classes, aptitude for systems design, strong analytical and communication skills, and committed work ethic. I have thorough trading and operations experience in many global OTC and listed markets/instruments: financial and commodity futures, equities, FX, interest rate swaps and swaptions, equity options, credit derivatives, etc. I also have succeeded in keeping the fund ahead of the curve regarding Dodd Frank mandates and constantly improving the day to day operations of Barnegat. I am adept at ensuring smoothness in all processes and procedures while keeping the fund lean and mean.

I've been correctly accused of expanding job descriptions because I think on my feet, adapt quickly to shifting priorities, and do whatever it takes, regardless of role or position, to get things done. I am driven by more than just a desire to do a good job. I strive to continuously make processes even better, not only because an employer would expect me to, but because I just can't help it. I have taken the infrastructure at The Barnegat Fund from its starting point as a jumbled mess and molded it into a smooth and efficient operation which allows three guys in a room to manage a $700MM Fixed Income / Relative Value hedge fund to better than 96th percentile returns spanning just about any time period that you can think of.

Barnegat recently hired a dedicated operations person for the fund so I was somewhat thrust into a very concentrated portfolio management role since much of the daily running of the business here has been reallocated away from me. I have never genuinely aspired to be a portfolio manager in an individual / silo format and unfortunately, the incentive structure at Barnegat did not recognize my contributions that were not clearly tied to a stream of revenue so it is time for me to move on and search for a firm with a strong team culture.

My top to bottom experience at Barnegat has enlightened me to all of the nuances involved in managing money and running a hedge fund. And while I do enjoy execution trading and indeed have success managing a small carve out of Barnegat's assets for my own book, I also have an overall desire to act in the COO/Operations Manager description to mold myself and my firm of employment into the most efficient investment engine possible. Additionally, I see Barnegat's structure of overlap between operations, trading and portfolio management as problematic for many reasons. I believe the perspective I have from the front end of our business allows me to run rings around the main constituency in this type of role, which is recent graduates heavily armed with theory but no perspective on how the system really works. I very often hear the "you're overqualified" excuse from people who have a 1 inch round hole and are looking with tunnel vision for a 1 inch round peg to fill that hole. I am more of a 2 inch square peg which has plenty of ability to fill that smaller hole and has the added bonus of extra skills that are value added to the forward thinking person who can look slightly outside the box. My strong operations / settlements / analysis / trade mechanics knowledge should allow me to carve out a position of great value somewhere and I hope that you will take a moment to reflect upon my experience and qualifications and provide some feedback regarding my skill set.

I welcome your input and thoughts regarding opportunities going forward, and please call or email me any time if you have any questions at all. In the interim, please feel free to distribute my attached resume as you see fit and enjoy the rest of your summer.


Derek Barnes

A BuzzFeed News investigation, in partnership with the International Consortium of Investigative Journalists, based on thousands of documents the government didn't want you to see.