The fast track: He keeps old job while starting hedge fund

Who says you can’t have your cake and eat it too? Craig Ellis, 42, portfolio manager of the $325 million Orbitex Info-Tech and Communications Fund, is starting his own hedge fund without leaving his day job to do so.

He will continue as manager of the Orbitex fund and even hopes to run his fund out of the same Park Avenue office building in New York.

“I am currently talking to potential investors about the new fund, and expect a third of its investors to be institutional, with the balance high net-worth individuals. While we haven’t set the minimum investment level yet; this will probably be around $1 million,” he says.

His deal is a sign of the red-hot demand for technology expertise. Shortly after Mr. Ellis’ announcement came word that Erin Sullivan, manager of Fidelity’s Aggressive Growth Fund, had quit to start her own hedge fund.

Mr. Ellis’ Info-Tech and Communications fund was up more than 161% in 1999, beating the 135.46% rise in the average tech fund.

While he hasn’t yet filed with the Securities and Exchange Commission, he predicts that his hedge fund will be running before May 1. It will initially be capped at $100 million, he says, as it needs “a manageable structure.”

Its investment profile will be similar to his Orbitex fund, in- vesting in a range of companies, like Amsterdam’s Equant NV, which provides international data network services to multinational businesses, firms in the fiber-optic sector like United Global Com Inc., which has operations in Europe, Australia and New Zealand, and semiconductor companies.

“My mutual fund has a 20% weighting towards semiconductor firms and newly listed companies,” says Mr. Ellis. “I initially expect pretty much the same mix for the hedge fund.”

Mr. Ellis is, in fact, counting on the work he does for Orbitex to cross over into his hedge fund venture, effectively giving him one job for the salary of two.

John Davidson, Orbitex’s chief investment officer, says that allowing Mr. Ellis to launch his own hedge fund and continue running the mutual fund ensures continuity of management. “Much of the company analysis and research he conducts for us will be valid for his hedge fund, and we will continue to evaluate Craig on the basis of the bottom-line performance of his mutual fund,” he adds.

potential conflict feared

Dion Friedland, president of the Hedge Fund Association in Miami, says one of the issues that will have to be addressed is how these dual managers decide what to buy for each fund, as both can be competing for the same stock.

Mr. Davidson says the Orbitex Financial Services Group, which has $12 billion under management, currently has no financial involvement in the new hedge fund, although Mr. Ellis says that it may well be registered as a member of the Orbitex Group of Funds.

Still, it appears that any of Orbitex’s other portfolio managers looking to follow Mr. Ellis’ example are unlikely to receive quite such a warm reception.

“I don’t see such a mutually beneficial situation arising again,” Mr. Davidson says. “We feel the ar- rangement with Craig is beneficial not only to him, but also for Orbitex and fund shareholders. It is also not that unusual as there is a growing number of such arrangements.” Mr. Davidson says.

Mr. Ellis joined Orbitex from Alliance Capital Management in New York, where he was responsible for investments in global communications technology.

Earlier, he was a telecommunications analyst and technology research director at Wheat First Butcher Singer, now part of First Union Corp.