Taproot Management, a hedge fund launched in the third quarter of last year with $250 million in backing from the Canada Pension Plan Investment Board (CPPIB), has experienced financial losses since its inception. The firm, co-founded by David Lin and Jason Beverage, aims to generate returns comparable to multistrategy hedge funds without incurring the high costs associated with employing numerous portfolio managers.
David Lin, the founder, previously worked at Tamridge and Glenview Capital, while Jason Beverage, serving as chief investment officer, brings experience from the quant-focused firm Two Sigma. Taproot utilizes a computer-driven investment approach, relying on internal analysts who submit ideas into an algorithmic platform that ultimately decides investments. This model contrasts with traditional multistrategy funds, which employ many human portfolio managers and often have greater operational costs.
Despite its innovative strategy, Taproot has encountered a challenging start, with losses of about 1% during its first six months and continued losses in the initial months of 2026. These setbacks occur amid a difficult environment for quantitative funds, with prominent managers such as Renaissance Technologies and Engineers Gate also reporting losses recently. Industry sources described July as part of a ‘‘long, slow bleed’’ for quant-oriented funds.
In addition to financial challenges, Taproot experienced a leadership change when Kevin Merritt, the firm’s director of research and partner, began garden leave in March. Merritt, who joined Taproot prior to trading commencing, previously held roles at Wedbush and Citadel’s Aptigon unit. His responsibilities have since been assumed by Ted Orenstein, head of equities at Taproot, who has investment experience with firms including SAC Capital, Millennium, and Walleye.
Taproot’s approach is somewhat akin to the centralized book models used by large hedge funds that consolidate top ideas within an internal platform. However, unlike Marshall Wace’s TOPS strategy, which sources investment ideas externally from sell-side analysts, Taproot generates ideas solely through its internal team of investment analysts. This internal alpha capture structure aims to reduce management costs, appealing to large institutional investors that seek strong returns at lower fees.
Multistrategy hedge funds have gained popularity among institutional investors such as pension funds and sovereign wealth funds for their consistent performance across various market conditions. However, the escalating cost of talent in this sector has fueled demand for funds like Taproot, which offer a potential alternative at reduced expenses.
Efforts to launch similar lower-cost multistrategy funds have met with mixed success. For example, Norias Research, founded by former Point72 president Doug Haynes in 2024, did not successfully launch. Meanwhile, Centerbook Partners, led by David Stemerman, manages over $1 billion and uses a network of external managers for investment ideas, reflecting different approaches to balancing costs and performance.
As Taproot continues to navigate a complex market and operational adjustments, its progress will be closely monitored by investors interested in low-cost, multistrategy hedge fund alternatives.
