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LAS VEGAS (Reuters) – Two major institutional investors are backing Cinctive Capital, a new hedge fund being launched later this year by industry veterans Richard Schimel and Larry Sapanski, people familiar with the matter told Reuters.

The Employees Retirement System of Texas, which invests roughly $28 billion, and PAAMCO Prisma, which built its reputation on investing with new hedge fund managers, have committed an undisclosed amount of cash to Cinctive. The leaders come from shuttered hedge fund Diamondback Capital.

The investors agreed to lock their money up for multiple years, the sources said, talking on the condition of anonymity. Their investments will help Cinctive launch in the third quarter. The firm is aiming to raise hundreds of millions of dollars, the sources said.

Spokespeople for the pension fund, PAAMCO Prisma and the hedge fund either did not respond to requests for comment or declined to comment.

Cinctive may be one of the most prominent hedge fund launches in 2019, partly because the two managers previously ran Diamondback Capital, which closed in the wake of an insider trading probe several years ago here

Since then, hedge funds have generally fallen out of favor because of high fees and lackluster returns. But some institutions are getting back in to help diversify exposures at a time of growing concern over how long the stock market boom can last.

Cinctive will compete with other multi-manager firms like Citadel, Millennium Management and Point72 Asset Management.

New York-based Cinctive has hired 25 employees, one of the sources said. It has 10 portfolio managers on board and may hire up to five more before the launch, which could happen as early as August.

Both Schimel and Sapanski worked for Point72’s founder, Steve Cohen, at his prior firm, SAC Capital Advisors. SAC pleaded guilty to insider trading charges in 2013.

Diamondback’s offices were raided by the FBI. The firm and its founders were never charged with any wrongdoing.

Diamondback was founded by Schimel, Sapanski and Chad Loweth. They returned an average 9 percent a year after fees over the fund’s lifetime. Diamondback charged a 2 percent management fee and took another 30 percent of profits. The fund made money in 2008 and had only one year of losses, when it slipped 3 percent in 2011.

After closing Diamondback, Schimel launched Sterling Ridge and later worked for Citadel, while Sapanski ran Scoria Capital.

Reporting by Svea Herbst-Bayliss; Editing by Lauren Tara LaCapra and Leslie Adler

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