Magnetar Capital

Last updated
Magnetar Capital LLC
Company type Private
Industry Alternative Investment Management
Founded2005;20 years ago (2005)
Founders
  • Alec Litowitz
  • Ross Laser
Headquarters Evanston, Illinois [1]
Key people
  • David Snyderman (Managing Partner)
  • Ross Laser (president) [1]
Services Investment management
AUM US$18.6 billion (2025) [2]
Number of employees
260 [1]
Website www.magnetar.com

Magnetar Capital LLC is a multi-product, multi-strategy alternative asset management firm based in Evanston, Illinois. The firm was founded in 2005 and invests in alternative credit and fixed-income, systematic investing, venture, and fundamental and event-driven investing strategies. [3] [4] Magnetar has additional offices in New York City, London, and Menlo Park. [4]

Contents

The firm was actively involved in the collateralized debt obligation (CDO) market during the 2006–2007 period. In some articles critical of Magnetar Capital, the firm's arbitrage strategy for CDOs is described as the "Magnetar trade". [5] While the CDOs Magnetar Capital helped create led to losses on Wall Street, the company profited as a result of its hedged investment strategy; Magnetar Capital had protected itself against losses on CDOs by purchasing credit default swaps. [6] As of 2010, 23 of the CDOs in which Magnetar Capital invested had become "nearly worthless". [7] [8] Despite investigations by the U.S. Securities and Exchange Commission into several deals in which Magnetar Capital invested, no enforcement action was taken against the firm. [9]

History

Magnetar Capital was founded in 2005 by Alec Litowitz (formerly of Citadel LLC) and Ross Laser (formerly of Glenwood Capital Partners). [1] [10] Based in Evanston, Illinois, [11] the firm started with $1.8 billion in capital, making it one of the largest hedge-fund launches at the time. [1]

Since inception, the firm has invested across numerous strategies, but following the great financial crisis, Magnetar turned its focus to fixed income. [10] Other strategies the firm has invested across include quantitative strategies, energy & infrastructure, and healthcare. [1] [10] [12]

The firm entered the film financing business in 2013, when it provided most of the funding for a $400 million co-financing deal that provided 20th Century Fox with money to fund a slate of films over a five-year period. [13]

In 2014, Magnetar Capital introduced two new energy funds, Magnetar Solar Holdings and Magnetar Solar Opportunities Fund. [14]

New York City-based Blackstone Group's hedge fund unit, Blackstone Alternative Asset Management, through its Strategic Capital Holdings Fund, bought a minority stake of Magnetar in 2015. [11] [15] Financials of the deal were not disclosed; Magnetar said the deal would help it expand, and management remained in place following the deal. [16]

In 2022, David Snyderman succeeded co-founder Alec Litowitz as managing partner. [17]

The firm’s assets under management reached approximately $18.6 billion as of February 2025. [2]

Investment strategy

Magnetar Capital invests in alternative credit and fixed income, systematic investing, venture, and fundamental and event-driven investing strategies. [3] [4]

Alternative Credit and Fixed Income

Magnetar’s alternative credit and fixed income strategy includes specialty finance investments. This involves the ownership of financial assets, hard assets, and contractual cashflows or investing in debt instruments secured by these types of assets. [18]

Magnetar has been investing in financing significant risk transfer (SRT) transactions for over 15 years. In 2023–2024, Magnetar executed 12 SRT deals totaling $724M across seven asset classes, earning the firm “Investor of the Year” at Structured Credit Investor’s Capital Relief Trade awards. [19]

Systematic Investing

Magnetar’s systematic investing business attempts to capture return streams associated with traditional hedge fund strategies through rules-based, transparent and liquid strategies. Its current strategies include systematic risk arbitrage, systematic convertible arbitrage, and equity statistical arbitrage. [20]

Ventures

In 2024, Magnetar launched its ventures business, which focuses on early- to growth-stage companies, largely in the AI and technology space. In addition to capital investments, Magnetar launched a dedicated fund in 2024 that provides companies with access to computing power through CoreWeave. [21]

Notable Investments

Magnetar became the largest equity holder in cloud computing provider CoreWeave, after investing $50 million in a convertible note issued by the company in 2021, [22] leading the Series B round in 2023, participating in the company’s series C funding round in 2024, and participating in a secondary share sale, also in 2024. [23] [24] [25] Magnetar was reported to be the largest beneficiary from CoreWeave’s IPO in 2025. [22]

Other investments include

2006–2007 involvement with CDOs

Magnetar Capital was actively involved in the CDO markets during the 2006–2007 period, when it invested in the equity of about $30 billion worth of them. [6] [34] CDO investments are divided into risk-based tranches: The highest-risk slices offer the highest yield, whereas the safer pieces have lower yields. [6] Magnetar Capital took long positions in the highest risk slices of synthetic CDOs and hedged those positions by placing short bets on safer slices called mezzanine tranches via credit default swaps (which act similarly to an insurance policy) because Magnetar considered the former to be underpriced relative to the latter. [6] [10] [35]

By establishing this arbitrage, Magnetar could profit from this relative mispricing regardless of how the overall housing market changed. When the market collapsed in 2007, Magnetar lost money on the riskiest slices it bought, but made much more from the hedges because of the relative mispricing that it had anticipated. [6] According to mortgage analysts, Magnetar Capital would have benefitted from its "Magnetar trade," as it was later referred to, regardless of whether the subprime market collapsed. [6]

ProPublica 's coverage of the CDO industry, which won a Pulitzer Prize in 2011, made a number of allegations regarding Magnetar Capital's CDO investments, including that Magnetar Capital's trades in the CDO market helped worsen the 2008 financial crisis by helping to structure CDOs the company was planning to short (bet against). [36] [37] Other claims made by the ProPublica series include: Magnetar Capital tried to influence CDO managers to buy riskier bonds to increase the likelihood of those CDOs failing; CDOs that Magnetar Capital invested in "defaulted" at a much higher rate than similar CDOs; and the CDO market would have "cooled off" in late 2005 had Magnetar Capital not entered the market, resulting in a less severe financial crisis. [7] [36] ProPublica did note that in its view, while Magnetar Capital's CDOs might have prolonged and exacerbated the 2008 financial crisis, the firm did not cause the crisis or the housing bubble. [38]

Contrary to the allegations, Magnetar Capital maintains that it did not control asset selection for the CDOs in which it invested and that the firm did not place an overall bet against the housing market. [39] The firm said its investments were market neutral and would have made money whether the housing market went up or down. [36] According to the Financial Times, "Magnetar argues that it was not shorting the subprime market, but was arbitraging between different layers of CDOs, taking advantage of the fact that it could get a yield of 20 per cent on the equity and then hedge that by shorting the mezzanine layers". [40]

In 2010, the Securities and Exchange Commission filed a complaint against JP Morgan Chase for a deal in 2007 that involved securities picked by Magnetar Capital. [36] [41] [42] JP Morgan settled the lawsuit for $153.6 million in 2011. [43] Separately, in 2012, The Wall Street Journal reported that the SEC was investigating whether Magnetar Capital had any influence over asset selection of a $1.5 billion CDO created by Merrill Lynch called Norma CDO I, [44] [45] [46] but the SEC took no action against the firm. [39] [47]

In 2010, Magnetar Capital's directors, among others, won the Ig Nobel Prize in economics. [48] That same year, Intesa Sanpaolo named named Magnetar Capital, and others, in its lawsuit against Credit Agricole, alleging fraud related to the CDO Pyxis ABS CDO 2006-1; however, the case was dismissed by a judge in 2013. [49] [50]

See also

References

  1. 1 2 3 4 5 6 Copeland, Rob (24 May 2017). "This Old School Hedge Fund is Going Quant". The Wall Street Journal . Retrieved 2 April 2018.
  2. 1 2 Tomkiw, Lydia (February 13, 2025). "Magnetar's head of healthcare departs for Millennium". Pensions & Investments. Retrieved August 18, 2025.
  3. 1 2 "Magnetar Starts First-Ever Venture Fund, Targets Generative AI". Bloomberg. August 26, 2024. Retrieved July 7, 2025.
  4. 1 2 3 "Magnetar closes $235M venture fund to back generative AI startups". TechFundingNews. August 27, 2024. Retrieved July 7, 2025.
  5. The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going Archived 2010-04-10 at the Wayback Machine , by Jesse Eisinger and Jake Bernstein, ProPublica, April 9, 2010
  6. 1 2 3 4 5 6 Ng, Serena; Mollenkamp, Carrick (14 January 2008). "A Fund Behind Astronomical Losses". The Wall Street Journal . Retrieved 7 May 2018.
  7. 1 2 "The Inside Job. Act One: Eat My Shorts" (Episode 405), This American Life . (2010-04-09), Alex Blumberg, Jake Bernstein, Jesse Eisinger
  8. The "nearly worthless" comment is at 36:40 into the This American Life "Inside Job" audio story
  9. Eaglesham, Jean (13 December 2013). "Merrill Settles With SEC Over Crisis-Era Bond Deals". The Wall Street Journal . Retrieved 20 June 2018.
  10. 1 2 3 4 Amanda Cantrell (4 September 2012). "Meeting the Minds of Magnetar". Institutional Investor's Alpha. Archived from the original on 10 October 2016. Retrieved 7 May 2018.
  11. 1 2 Stevenson, Alexandra (14 May 2015). "Blackstone Buys Minority Stake in Hedge Fund Magnetar Capital". The New York Times . Retrieved 7 May 2018.
  12. Jahn Davis and Sean McMahon (14 July 2017). "Magnetar opens Houston office to expand footprint in energy trading". SmartBrief. Retrieved 7 May 2018.
  13. Abrams, Rachel (29 January 2013). "Fox closes $400 million co-financing pact". Variety . Retrieved 21 June 2018.
  14. Taub, Stephen (October 2014). "The Morning Brief: Magnetar, Saba Launch New Funds". Absolute Return + Alpha. Retrieved 21 June 2018. Alec Litowitz's Magnetar Capital has raised nearly $200 million for two new funds, Magnetar Solar Holdings (Cayman) and Magnetar Solar Opportunities Fund. The Evanston, Illinois-based hedge fund firm indicated in a regulatory filing that the new offerings are private-equity funds. The minimum investment for the offshore version is $100,000, according to a filing. Magnetar, which manages $12.4 billion, declined to provide further details.
  15. Chung, Juliet (14 May 2015). "Blackstone Buys a Piece of Hedge Fund Magnetar". The Wall Street Journal . Retrieved 7 September 2018.
  16. "Hedge fund Magnetar Capital says Blackstone buys minority interest". Reuters . 14 May 2015. Retrieved 7 May 2018.
  17. Burton, Katherine (June 7, 2022). "Magnetar's Founder Litowitz Steps Down From $14 Billion Firm". Bloomberg. Retrieved July 15, 2025.
  18. "Business Overview: Alternative Credit & Fixed Income". Magnetar. Retrieved August 14, 2024.
  19. "SCI CRT Awards: Investor of the Year". SCI. October 22, 2024. Retrieved August 22, 2025.
  20. "Business Overview: Systematic Investing". Magnetar. Retrieved August 14, 2024.
  21. "Magnetar Starts First-Ever Venture Fund, Targets Generative AI". Bloomberg News. August 26, 2024. Retrieved August 14, 2024.
  22. 1 2 Kinder, Tabby (2025-02-27). "Data centre operator CoreWeave lays groundwork for IPO". Financial Times . Retrieved 2025-07-19.
  23. Wiggers, Kyle (2023-04-23). "CoreWeave, a GPU-focused cloud compute provider, lands $221M investment". TechCrunch . Retrieved 2025-07-19.
  24. Villamor, Kay Aloha (2024-05-02). "CoreWeave Secures $1.1 Billion in Series C". The SaaS News. Retrieved 2025-07-19.
  25. Bajwa, Arsheeya; Hu, Krystal (2024-11-13). "CoreWeave closes $650 million secondary share sale at $23 billion valuation". Reuters . Retrieved 2025-07-19.
  26. Burke-Kennedy, Eoin (1 June 2017). "Dublin-based First Citizen nets €28m in new capital raise". Irish Times . Retrieved 21 June 2018.
  27. Stoker, Liam (25 January 2018). "Rockfire shoots up UK solar rankings with 300MW+ Magnetar portfolio purchase". Solar Power Portal. Retrieved 21 June 2018.
  28. Gallagher, Alanna (1 November 2017). "High-spec new builds on hip Arbour Hill from €445,000". Irish Times . Retrieved 21 June 2018.
  29. "Yate Shopping Centre bought for £58million by American investment firm". ITVX. 2022-02-26. Retrieved 2025-08-26.{{cite web}}: CS1 maint: url-status (link)
  30. Perlberg, Heather; Gittelsohn, John (21 October 2013). "Magnetar Goes Long Ohio Town While Shorting Its Tax Base". Bloomberg . Retrieved 7 May 2018.
  31. McEwen, Mella (12 February 2018). "Double Eagle Energy Holdings III secures $1 billion in equity commitments". Midland Reporter-Telegram. Retrieved 20 June 2018.
  32. "AI model developer startup Cohere raises $500M at $5.5B valuation". SiliconANGLE. 2024-07-22. Retrieved 2025-08-12.{{cite web}}: CS1 maint: url-status (link)
  33. "TensorWave Secures $100 Million Series A Funding Co-Led by Magnetar and AMD Ventures". Yahoo! Finance. 2025-05-14. Retrieved 2025-08-12.{{cite web}}: CS1 maint: url-status (link)
  34. Abigail Moses (2006-08-14). "Reach for the Stars: Ill. Fund Swallows Big Chunk of Synthetic ABS" (pdf). Derivatives Week. Retrieved 2010-05-01.
  35. Banks Bundled Bad Debt, Bet Against It and Won by Gretchen Morgenson and Louise Story, 23 December 2009, New York Times
  36. 1 2 3 4 Eisinger, Jesse. "The Magnetar Trade: How One Hedge Fund Helped Keep the Bubble Going". ProPublica . Retrieved 4 March 2016.
  37. Adams, Richard (18 April 2011). "ProPublica makes history with web-based Pulitzer Prize win". The Guardian . Retrieved 22 June 2018.
  38. Eisinger, Jesse; Bernstein, Jake (16 April 2010). "Your Magnetar Questions, Answered". ProPublica .
  39. 1 2 Eaglesham, Jean (6 August 2013). "SEC's Hunt for Crisis-Era Wrongdoing Loses Steam". The Wall Street Journal . Retrieved 22 June 2018.
  40. Gapper, John (20 April 2010). "Magnetar comes out fighting on synthetic CDOs". Financial Times . Retrieved 22 June 2018.
  41. "SEC.gov" (PDF).
  42. Ovide, Shira (21 June 2011). "Timeline of the J.P. Morgan CDO Deal". The Wall Street Journal . Retrieved 7 May 2018.
  43. Ovide, Shira (21 June 2011). "J.P. Morgan to Pay $153.6 Million to Settle SEC Charges". The Wall Street Journal . Retrieved 7 May 2018.
  44. The Magnetar Fallout: Who’s Been Charged, Has Settled, or is Now Being Investigated? by Cora Currier, ProPublica, July 19, 2012
  45. Eaglesham, Jean (17 May 2012). "SEC Probes Role of Hedge Fund in CDOs". The Wall Street Journal . Retrieved 7 May 2018.
  46. Bernstein, Jake; Eisinger, Jesse (12 December 2013). "SEC Issues More Fines Over Magnetar Deals – and Appears to Move on". ProPublica . Retrieved 7 May 2018.
  47. Gallu, Joshua (12 December 2013). "BofA's Merrill to Pay $131 Million Over Norma CDO Marketing". Bloomberg . Retrieved 10 September 2018.
  48. Sample, Ian (1 October 2010). "Ig Nobel awards go to slime mould and fruity bats". The Guardian . Retrieved 17 April 2018. Awarded jointly to the executives and directors of Goldman Sachs, Lehman Brothers, Bear Stearns, Merrill Lynch, AIG and Magnetar
  49. Glovin, David (7 April 2012). "Credit Agricole Unit, Magnetar Sued by Intesa Over 'Pyxis' CDO". Bloomberg . Retrieved 10 September 2018.
  50. Stempel, Jonathan (13 February 2013). "Credit Agricole wins end to Intesa lawsuit on toxic CDO". Reuters . Retrieved 7 May 2018.