Microsoft Alumni Plan New Hedge Fund

Tahoma's literature claims that between July 2000 and July 2005, Scott's team produced an average annual return of 7.07% at Microsoft, making it the third-largest profit generator at the company. A Microsoft representative didn't immediately respond to an email seeking confirmation of the performance.

Scott isn't a media star. His name wasn't familiar to several analysts who follow the stock. "They never gave us a lot of information" on the portfolio's managers, said one. And only limited information is available about the makeup of the Microsoft portfolio. According to slides presented by the company to analysts in 2003, the $53.4 billion Treasury portfolio allocated 70% to fixed-income, 20% to cash and 10% to equity.

"Recreating the diversification in asset classes, strategies and trades used at Microsoft will be a hallmark of Tahoma Capital," the brochure says. Tahoma plans to take short and long positions in a diversified pool of assets including stocks, bonds, currencies, credit options, municipals and commodities.

Tahoma says it can generate high returns without taking on undue risk. No more than one-third of a fund's available risk will be deployed to a single asset class, portfolio manager or risk factor, states the brochure.

Still, some on the Street wonder if a treasurer -- even Microsoft's -- will be able to develop the cutthroat mindset needed in hedge fund investing. "Microsoft generated a lot of its earnings by selling puts in conjunction of its buyback program," said one potential investor studying the fund. "It is not clear whether [this manager] can make money just by selling puts or by actually trading."

Scott, reached by phone, says he wasn't involved in any "put program" at Microsoft. "It is something I was not responsible for," he says. Scott says his role was to manage money across all asset classes, a background that should prepare him well for his new job.

"I have managed more money than most hedge funds managers," Scott says.