Garda Capital Partners has filed a lawsuit against Schonfeld Strategic Advisors, accusing the rival hedge fund of improperly recruiting a key fixed-income portfolio manager in breach of his non-competition agreement. The lawsuit, filed in New York state court, alleges Schonfeld “induced” Nicolas Monaghan to leave Garda, where he had generated over $250 million in profits since 2019.
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This legal battle underscores the intense competition for talent within the financial services industry. A similar high-profile case recently concluded with a settlement between Jane Street Group, Millennium Management, and two former Jane Street traders accused of stealing a proprietary trading strategy.
Schonfeld has declined to comment on the allegations, and it remains unclear whether Monaghan has officially joined the firm. Garda Capital Partners has not yet issued a public response.
Intense Competition Between Industry Giants
Garda’s lawsuit emphasizes the direct competition between the two firms, both of which specialize in fixed-income strategies. Pensions & Investments magazine recently ranked Garda and Schonfeld as the 41st and 42nd largest hedge funds globally, respectively. The lawsuit states, “Garda and Schonfeld compete with one another at the highest level of the financial services industry.”
Non-Compete Agreement and Compensation Disputes
According to the lawsuit, Monaghan and his supporting analyst, Thibault Cons, signed three-year non-compete agreements in late 2022 when they relocated to Zug, Switzerland. These agreements, effective March 2023, outlined compensation terms, with Monaghan earning $27.5 million and Cons receiving $3.3 million during their tenure at Garda. The non-compete clauses are valid until March 2026.
Neither Monaghan nor Cons are named as defendants in the lawsuit, and attempts to contact them have been unsuccessful. Garda contends that both individuals resigned abruptly in April, citing excessive work hours, a claim the firm dismisses as “contrived” given their autonomy over their schedules.
Allegations of Financial Inducement and Premature Investment Liquidation
The lawsuit alleges that Schonfeld initiated contact with Monaghan and Cons in July 2023, prompting Monaghan to establish new companies and relocate to Monaco in preparation for his new role. Garda claims that Schonfeld enticed them to leave by offering lucrative employment that would compensate for the substantial bonuses they forfeited by resigning—almost $8 million for Monaghan and $1 million for Cons.
Furthermore, Garda asserts that it was forced to prematurely liquidate investment positions managed by Monaghan at unfavorable prices, resulting in significant financial losses. The firm is seeking damages to compensate for these losses.
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High Stakes in the Hedge Fund World
This lawsuit highlights the aggressive competition and high stakes involved in recruiting top talent within the hedge fund industry. Schonfeld, managing funds for billionaire Steven Schonfeld and external investors, employs a diverse range of investment strategies. Garda, with over $10 billion in assets under management, concentrates on relative-value trading across various asset classes.
The outcome of this case could significantly impact future recruitment practices and non-compete enforcement in the hedge fund sector. The case is Garda Capital Partners v. Schonfeld Strategic Advisors LLC, filed in the New York State Supreme Court, New York County.
