He also sits on the board of his high school, a private Jesuit college preparatory in his hometown, in addition to serving on numerous committees there.
For Level Global, F.B.I. Raid Is a Final Blow
David Ganek faced two stark choices: try to keep running his hedge fund after a raid by the F.B.I., or shut it down.
Mr. Ganek decided to capitulate, not even trying to persuade investors to keep their $4 billion in his hedge fund, Level Global Investors, people close to the fund said. Less than three months after the raid, he told investors he would return their money.
It was a sharp reversal from last fall, when Level Global foresaw a growth spurt that could make it a $5 billion to $7 billion hedge fund, investors say. The fund was on the verge of receiving hundreds of millions of dollars in new money. It had plans to increase staff and expand. An investment fund run by Goldman Sachs had taken a minority stake in Level Global several months earlier.
But on a cold morning in late November, agents from the Federal Bureau of Investigation raided the Midtown Manhattan offices of Level Global, as well as the offices of three other hedge funds, grabbing files and computers, as part of a broad investigation into insider trading on Wall Street.
While no one at Level Global has been accused of any wrongdoing, the fund could not survive the raid’s blow to its reputation. The episode illustrates how vulnerable hedge funds — even large, successful ones — can be when investors grow nervous. Moreover, it shows the difficult choices hedge fund managers have when their fund has been ensnared in an investigation. In this case, those choices fell on Mr. Ganek, 47, the trader and art world socialite.
The investors in Level Global, who spoke on the condition of anonymity because the meetings were private, said that in the days after the raid, Mr. Ganek expressed doubt about the firm’s survival. In conversations with these investors, he recalled that the F.B.I. had barged into the firm’s offices and demanded a lot of information. He didn’t know much else, he told them.
“I don’t know what we’re going to do,” Mr. Ganek told one investor, when asked about the future of the fund.
Anthony R. Chiasson, who founded the firm with Mr. Ganek in 2003, seemed to be barely involved during the last days of Level Global, investors say.
Through a spokesman, Mr. Ganek, who owned a larger share of the hedge fund, and Mr. Chiasson declined to be interviewed.
As Mr. Ganek met with other investors, the stress was evident on his face. Though he maintained an even tone, those who know him say they could see that the open-ended investigation was wearing him down.
Investors were happy — if not overwhelmed — with the fund’s returns, which averaged roughly 9 percent a year since 2003, including only modest losses during the financial crisis.
After the raid, however, investors asked for $750 million back, and those who had planned to invest new money withdrew.
It was a far cry from the love affair investors had with Level Global at the beginning. At the founding of the firm, part of the appeal was the mystique of Mr. Ganek, who was considered a profit center when he worked as a trader for Steven A. Cohen’s hedge fund, SAC Advisors. Mr. Ganek, who ran a technology team, and Mr. Chiasson, a technology analyst, left the colossal hedge fund at a time when SAC was posting some of the biggest gains in its history. The pair were among the earliest spinoffs from Mr. Cohen’s fund, which has since become something of a breeding ground for hedge fund managers.
To investors, Mr. Ganek pitched Level as a fund inherently negative on the market, an appealing strategy to those looking for a more cautious approach, despite what some considered high fees. And he kept true to that vision: While Level often underperformed the Standard and Poor’s 500-stock index during boom times, the hedge fund weathered the turbulence of 2008 admirably, investors say.
In the early years, the operation was scrappy, former employees remember. Though it began with $550 million, at the time a huge amount for a new hedge fund, the office atmosphere had the air of a start-up. Mr. Ganek sat on the floor with his traders, barking orders and reading off headlines from the Bloomberg terminal. Mr. Chiasson, by contrast, was a less intense manager, sitting with his analysts and walking over to speak to employees when he needed something.
That contrasting dynamic seemed to persist in their personal lives, as well. As their firm grew, Mr. Ganek’s prominence ballooned on the Manhattan social scene, especially in the worlds of art and philanthropy where he and his wife, the novelist Danielle Ganek, were mainstays of auctions and glitzy galas. Mr. Chiasson, for his part, eschewed the spotlight.
In the years after founding Level Global, the Ganeks gained reputations as prominent collectors of modern art, though they had been collecting for nearly 20 years. The walls of their $19 million home at 740 Park Avenue, one of the city’s most prestigious co-ops, were at varying times graced by the works of Damien Hirst, Richard Prince and Jeff Koons. Mr. Ganek even commissioned Ed Ruscha, a modernist known for his one-word paintings, to fashion a work incorporating the word “Level” for the hedge fund’s offices.
Mr. Ganek, the son of a New York money manager, and his wife donated a collection of Diane Arbus photographs to the Metropolitan Museum of Art, and he was named to the Guggenheim Museum board of trustees.
Mr. Chiasson, 37, who grew up near Portland, Me., has kept a far lower profile in his more than 15 years on Wall Street. Rather than gravitate toward the city’s high society, he serves on the board of trustees at Babson College, where he graduated in 1995, and has donated generously to the school, including a million-dollar gift in 2010 for a summer program to help develop the entrepreneurial projects of students.
He also sits on the board of his high school, a private Jesuit college preparatory in his hometown, in addition to serving on numerous committees there.
In the weeks after his firm was raided, Mr. Chiasson briefly appeared at an alumni event in New York for the high school, and attendees said he appeared upbeat.
After starting his career as an equity analyst at Salomon Brothers, Mr. Chiasson decided to move over to the buy side and joined SAC, where he eventually worked on the technology team alongside Mr. Ganek. When the pair started their own operation, they decided to name it Level. Mr. Chiasson, who lives on the Upper East Side with his wife and child, once described that decision as: “Level is a palindrome which connotes balance and adaptability — two key investing traits.”
Mr. Chiasson was seen as something of a consensus builder at the firm, where he managed the team of analysts as head of research. This week he began to unwind at least one of his connections to the firm. In 2006, Mr. Chiasson took a $3.3 million loan against his $4.2 million home on East 96th Street and invested it in Level Global, according to city records and a person close to him. This week, anticipating the return of that money, Mr. Chiasson paid the loan off in its entirety, according to city records.
In the end, however, it was Mr. Ganek who spoke for the firm. Though previous investor letters were signed by both founders, the Feb. 11 one announcing the fund’s closure bore only Mr. Ganek’s name. “Unfortunately, the ongoing government investigation presents significant challenges to maintaining our collective focus,” he wrote in the letter.
At the office that day, Mr. Ganek stood before his 61 employees and announced his decision to end the firm’s highly successful run. He stuck around offering handshakes and hugs to his employees, many of whom were let go that day. Afterward, he took the day off to unwind and attended his son’s squash game, a person close to him said.
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