hedge fund - Institutional Investor`s Alpha

AIN.09.13.04
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FREIDHEIM’S NEW VENTURE
TAKES SHAPE
SEPTEMBER 13, 2004
VOL. V, NO. 17
Web Exclusive
NYLIM To Make Hedge
Fund Push
New York Life Investment
Management is putting together its
first quantitative oriented equity
platform, which will comprise its first
concerted push into hedge funds.
See AIN’s Web site,
www.iialternatives.com
Pensions To Hedge Funds:
Thanks But No Thanks
Some U.S. public pension funds are
less than enthusiastic about hedge
funds, and are not likely to invest any
time soon.
See stories, page 6
At Press Time
Service Employees Eye Hedge Funds 2
Oak Hill Responds To LTCM Ruling
2
U.S. News
Mellon Launches Absolute
Return Strategy
4
N.Y. Fund of Funds Seeks Managers 4
Anchorage Preps Funds
6
European News
London Firm Develops Energy Fund 8
BaFin Adopts Rules For Insurers
10
U.K. Firm Seeks Analyst
11
Departments
Search & Hire Directory
11
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Distressed debt honcho Steve Freidheim is wasting no
time preparing his hedge fund firm following a
planned spinoff from Och-Ziff Capital Management
at the end of the year. The new firm, which has not
yet been named, will consist of other officials from
Och-Ziff and new hires from Moore Capital
Management, Andor Capital Management and Bank Julius
(continued on page 15)
NEW HAMPSHIRE EYES HEDGE FUNDS
The $4.5 billion New Hampshire Retirement System is considering adding one or more
hedge fund of funds managers in the first quarter to handle up to $100 million. Ed
Theobald, chairman of the fund’s board, told AIN sister publication Money Management
Letter that the fund hired Pine Street, Arden and AIG in the last year or so to handle
$100 million combined and that the fund would likely allocate the same amount to the new
manager(s). “At this point we are looking to gain more experience with fund of funds
managers,” Theobald said. “We would probably look to invest in a stand-alone fund the
(continued on page 15)
Define ‘Client’
EX-DIM CHIEF CHALLENGES LEGALITY OF
REGISTERING ADVISORS
New questions about the legality of forcing hedge fund advisors to register with the
Securities and Exchange Commission have been raised by a former head of the SEC’s
Division of Investment Management. What the commissioners mean to do “is contrary to
the text and the entire history of the Advisers Act,” Marianne Smythe wrote in a comment
letter last week.
The letter asserted that the SEC was wrong on the most fundamental legal point involved:
(continued on page 15)
HEDGE FUND PAIRED WITH TAX STRATEGY
Start-up Lattice Capital Management is packaging a strategy that limits the high tax
ramifications and risk associated with hedge fund investing. The San Francisco investment
management firm is essentially pairing a targeted hedge fund of funds with a passive
portfolio from which it harvests tax losses, according to Mauricio Cevallos, partner and ceo.
The firm has constructed a hedge fund of funds, Lattice Growth Partners, backed by 10
sector-specialist long/short managers covering the technology, healthcare and
telecommunications areas. “We’ve tried to focus on the most inefficient areas of the market,”
noted Cevallos, a former executive v.p. and head of the high-net-worth Investment Counsel
(continued on page 15)
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Alternative Investment News
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September 13, 2004
At Press Time
Service Employees Likely To Seek Hedge
Fund of Funds
EDITORIAL
TOM LAMONT
Editor
The $1.45 billion Service Employees International Union pension fund, based
in Washington, D.C., is looking at hedge funds and could search for two or
more hedge fund of funds managers in the next three-to-six-months. Jack
Marco, consultant for the approximately $1.5 billion Taft-Hartley plan, said the
fund is looking into the asset class and expects to kick off a search shortly. He
estimated that the plan, based on Marco Consulting Group’s recommendations,
could seek to invest as much as 5% of its assets in the asset class.
Marco said he is suggesting alternatives to his larger clients as a diversification
ploy and as a replacement for fixed-income. “We are not very optimistic about
[fixed-income returns] for the next few years,” he said. Steve Abrecht, executive
director of benefits who oversees investments for the plan, did not return calls.
The fund has already invested in private equity, starting three years ago, on
the recommendation of Marco. SEIU has now committed 4% of an overall 5%
target allocation to the asset class.
STEVE MURRAY
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Golden State UFCW Plan To Examine Alts
The $3 billion UFCW Employers Benefit Plans of Northern California will
embark on an alterative investment plan in the upcoming months as it concludes a
radical 18-month restructuring of its pension plan, according to an industry
executive familiar with the fund. The source said the UFCW plan has already
moved into alpha tilt and market-neutral strategies as part of an overall
restructuring effort, but is now looking at private equity and hedge funds. The
insider said searches are likely but would not give a timeframe. Russell Crosby, the
fund administrator, was out of the office on vacation. Officials with the fund’s
consultant, New England Pension Consulting, directed inquiries back to the plan.
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Oak Hill Does Damage Control
Oak Hill Platinum Partners, an investment firm run by billionaire Robert Bass
and his investment team, is doing some damage control following a recent court
ruling involving the former partners of Long-Term Capital Management. The
firm is reaching out to its investors because two former partners of LTCM,
Myron Scholes and Chi-fu Huang, are principals at Oak Hill.
The United States District Court District of Connecticut recently issued a
ruling in a civil suit brought by the former partners of LTCM against the U.S.
Government. The court ruled against the partners in a matter involving a tax
dispute, namely that the Internal Revenue Service was correct in denying the
partnership the ability to claim roughly $106 million in capital losses in 1997.
Shortly after the ruling, Oak Hill sent a note to investors, a copy of which was
obtained by AIN, telling them the decision had no bearing on the firm or its
Oak Hill Contingent Capital Fund. “The taxes and penalties had previously been
paid by the taxpayers (in fact this was a precondition for them to file the lawsuit
in federal court) and they had a small fraction of the tax liability,” the note says.
Michael Schwenk, general counsel for Oak Hill, declined to comment and calls
to Scholes and Huang were not returned.
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September 13, 2004
U.S. News
Mellon Rolls Out Absolute
Return Strat
Mellon Capital has rolled out its newest absolute return
strategy, Global Alpha II, and is drumming up interest among
institutional clients and the consultant community. “We
launched the product more out of market interest than
anything else,” said Tom Hazuka, cio of Mellon Capital.
“There are clients out there who would rather have less
exposure to markets and more exposure to active
management. It kind of hits a sweet spot for clients.” Hazuka
said Global Alpha II, which overweights attractive markets
and shorts less-attractive markets, is a good strategy for
institutions that believe that markets are not priced to provide
sufficient returns. “Those buying these strategies are
concerned about the ability of stock [markets] and bond
markets to produce sufficient returns to meet plan liabilities,”
Hazuka said. “They’re saying, ‘let’s take our risk budget and
allocate some money away from market risk and put it toward
active risk.’”
Hazuka, who noted that the strategy currently has about
$300 million in assets under management with $50 million
more committed, said there’s been substantial interest in the
product in the past couple of months. “It’s been a continuing
flow,” he said, adding that the product doesn’t have a cap.
“Luckily the instruments we use are so liquid, there’s not a
real investment cap needed. We’d like to see it grow into a
multi-billion dollar strategy in the next several years. We think
that’s a reasonable target.”
Gotham Fund of Funds
Seeks Managers…
Mayer & Hoffman Capital Advisors, a $43 million New
York-based fund of funds, is seeking eight managers for its
Low Beta Strategy Allocation fund. The fund, launched last July,
invests in a mix of established and emerging managers and is
searching for event-driven, equity long/short and multistrategy hedge funds. The firm is also looking for managed
futures, fixed-income arbitrage, convertible arbitrage and
global macro funds. Founder Sam Kirschner said that his firm
will compile a short-list on Oct. 1 and that he hopes to finalize
the search by year-end.
The firm may also seek a couple of managers for its other
fund High Alpha Strategy Allocation also launched last July,
which currently invests in 13 managers. In order to enhance
returns, this fund allocates well over 50% to emerging
4
managers with usually less than three-year track records and less
than $100 million under management. Both funds differ in
terms of volatility, with the Low Beta fund being the less
volatile. Low Beta seeks a volatility lower than 5%, while the
High Alpha fund seeks less than 10% volatility. Both funds
carry a 1.25% management fee. The High Alpha fund carries a
10% incentive fee and the Low Beta fund a 5% incentive fee.
The firm is seeking managers globally. Matthew Hoffman,
co-founder and cio, ran manager selection and portfolio
construction at Credit Suisse Asset Management for its $6
billion fund of funds business until last year. “He has extensive
contacts in Asia and Europe,” Kirschner said.
…Adds Analyst
Mayer & Hoffman Capital Advisors, a fund of funds formed
in January by former Credit Suisse Asset Management fund of
funds executive Matthew Hoffman, has added David Paulsson
as a junior analyst. Paulsson joined from New York University
where he obtained a bachelors degree in finance. Paulsson said
he chose the $43 million fund of funds because he got his first
taste in alternative investments working with cio Hoffman
while being an intern at CSAM. Sam Kirschner, co-founder,
said the position is newly created because there are “more and
more funds to look at” with more dollars pouring into the
asset class.
Former Goldman Analyst
Launches Fund
Alerian Capital Management, a hedge fund start-up launched
by Gabriel Hammond, who covered the energy and power
sector at Goldman Sachs, recently launched the MLP Total
Returns Fund. The fund, which was launched with $6 million,
is being marketed to family offices and funds of funds. Alerian
is currently raising additional capital for the fund, said
Hammond.
The midstream energy Master Limited Partnership focused
hedge fund has a $1 million minimum investment. The fund’s
main strategy is long-term growth and the core of the
portfolio is concentrated in 8-15 MLP equity positions,
Hammond said. The core portfolio comprises 50-70% of the
fund’s total assets. The fund will also have a secondary
strategy that will aim to purchase MLPs that are substantially
undervalued. The relative value portfolio comprises 20-30%
of the fund’s total assets.
Alerian is also putting together an offshore vehicle that could
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be ready for launch in three months. MLP Fund will soft close
at $750 million and will hard close at $1 billion. The fund
carries a 1.5% management fee and a 20% performance fee.
The prime broker is Goldman.
Anchorage Readying Two Funds
Anchorage Capital Group, a New York-based startup run by
former Goldman Sachs bank debt honchos Kevin Ulrich and
September 13, 2004
Tony Davis, is prepping two new funds for launch in October.
The funds are named Anchorage Crossover Credit Fund, a
long/short credit fund and Anchorage Short Credit Fund, a short
credit fund, according to a Goldman Sachs prime brokerage
document, a copy of which was obtained by AIN. Goldman is
the firm’s prime broker. Fees and minimum investments could
not be determined. The firm’s first fund, Anchorage Capital, was
launched over a year ago and seeded by Reservoir Capital Group
(iialternatives.com, 10/22). Ulrich and Davis did not return calls.
Hedge Fund Hesistance: Hopefully Not A Trend
San Mateo Moves Them To
Back Burner
The $1.4 billion San Mateo County Employees Retirement
Association will not consider hedge funds, at least for another
three or four years. Such gap of time coincides with when the
plan will be readying its next asset liability study. The last one
was conducted last year by Strategic Investment Solutions, a
San Francisco-based consultant. Its main result was to move
from passive management to active management and not
to focus on hedge funds, said Sidney
McCausland, ceo, who declined to say
why. “They told us at the time that there
were lower hanging fruits they wanted
to harvest first,” he said. The plan
allocates 65% to equity, 29% to fixedincome and 6% to real estate.
Calls to Barry Dennis,
consultant at Strategic
Investment Solutions, were not
returned.
Maryland Delays
The $30 billion Maryland State
Retirement & Pension System
recently decided to make a foray
into private equity, but is unlikely to
consider hedge funds anytime soon. “I
don’t anticipate that we would consider hedge funds
next year,” said Steven Huber, cio. “I would doubt
that hedge funds would be seen as an attractive entry point
because a lot of money has been chasing these opportunities. I
would think that returns going forward are going to be lower
than what we’ve seen in the past,” he cautioned. The plan is
currently conducting an asset allocation study with its
6
consultant Ennis, Knupp & Associates, and should have the
first results by the end of the year.
The plan allocates 47% to domestic equities, 30% to fixed
income, 15% to international equities, 5% to real estate and
2% to private equity. Suzanne Bernard, consultant at Ennis,
Knupp in Chicago, did not return a call.
Indiana Teachers Shies Away
The $6.6 billion Indiana State Teachers Retirement
Fund will most likely steer clear of hedge funds for the
time being mainly because of transparency issues with
the asset class. CIO Bob Newland said the system’s
board looked closely at the asset class after
investment consultant Callan Associates
educated the fund earlier this year in several
types of alternative investments including
timber, commodities and hedge funds.
“The board wanted to look into hedge
funds but it doesn’t look very hopeful
that we’ll end up investing in it,”
Newland said. “There are a number of
reasons, but it’s mainly transparency
issues. Fees are another issue…our board
is just not comfortable with it.”
The board will, however, hear the results
of an ongoing asset-allocation study at the
end of September in which recommendations
could be made to foray into new asset classes,
though Newland said it was still too early to
say in which direction the fund could go. “Things
could change then [regarding hedge funds], but I just don’t
think it will happen,” Newland said, adding that the fund
had looked at putting 2% to 5% of assets in the asset class.
The fund currently counts real estate and private equity as
alternative investments.
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September 13, 2004
European News
U.K. Firm Plans European
Energy Fund
Millennium Asset Management, a London-based hedge fund
firm with over $2.7 billion under management, is planning to
launch a fund focused on Northern European energy markets,
with a particular emphasis on Norway. The firm has spent the
past few months readying a fund focused on Latin America
(iialternatives.com, 7/30), which launches this week, said Joe
Strubel, executive director. The decision to develop the energy
strategy is largely due to a recovery in the oil service markets,
explained Strubel. The fund is likely to launch in the first quarter.
As with the Latin American fund, the vehicle will charge a 2%
management fee coupled with a 20% performance fee, said
Strubel. It will have a $1 million investment minimum.
The Latin American fund is initially being offered to existing
Millennium clients, before being made available to other
investors. The firm has also recently closed its global high yield
fund at $140 million. “It’s pretty much hard-closed. We’ll let
existing people sneak in here or there,” said Strubel.
Pioneer Launches New
Fund of Funds
Pioneer Alternative Investments, which manages around
$3 billion in funds of funds, has launched a new vehicle that will
target both retail and institutional investors. The AllWeather
Strategies II fund of funds will be run similar to the original
Momentum AllWeather fund. The latter was closed to new
investors in June, at which point it held almost $1 billion,
according to Nigel Meir, head of institutional sales for the U.K.
and Scandinavia. Both funds focus on low-volatility strategies,
with portfolios that are re-weighted to reflect changes in the
economic climate.
The decision to close the original fund and launch a new
equivalent was predominantly driven by the desire to preserve
the first fund’s performance levels, explained Meir. “If you make
that decision, you have to launch a new product, and this has to
follow the same [strategy] because it was successful,” he
continued. This has the added benefit that the new fund of
funds can be balanced to better reflect the current financial
environment, Meir added.
The original AllWeather fund was launched by the
Momentum Group in 1995. Momentum was acquired by
Pioneer in 2002. The AllWeather vehicles have a primary focus
on event-driven strategies. The new fund is run by the core
Momentum team, led by Michael Goldman and Matthew
8
Nurick. It has been launched with about $80 million. The fund
is being offered to retail investors with a 1.5% management fee
and a 10% performance fee, with a $100,000 investment
minimum. There is more room for maneuver with institutional
clients, which are likely to be charged a 1% management fee,
although the performance fee is the same. The minimum
investment for an institution is around $20 million. Investors
could also opt for a restructured, customized version of the new
AllWeather fund, which would carry a minimum of around
$25 million.
ADI Taps Systeia Official For
Sales Spot
French hedge fund manager ADI has hired Sophie LenfantBiache from Systeia Capital Management as a senior member of
its sales team. Lenfant-Biache joined ADI to head the firm’s
French sales effort in a newly-created position. ADI, which has
€6 billion under management, had wanted to strengthen its sales
team, which now numbers eight employees, explained Catherine
Joly-Tissier, head of communications. Five are focused on
France, whereas the remaining three handle international sales,
said Lenfant-Biache.
Lenfant-Biache left Systeia in January, where she had been
senior relationship manager for the firm’s French client segment.
Prior to her stint at Systeia, Lenfant-Biache spent almost 11
years at BAREP Asset Management, the Paris-based hedge fund
arm of Société Générale. At the time of her departure from
BAREP, she was sales director for the firm. She was based in
Hong Kong from 1997-2000, launching BAREP’s South-East
Asian client business.
Fund of Fund Sales Head
Leaves Gartmore
Stephen Attenborough, head of European institutional sales for
funds of hedge funds at Gartmore Riverview in London, has left
the firm. He has not resurfaced elsewhere in the City, but a
source close to him said he is looking for a similar role at another
house. Attenborough’s role was made redundant as part of a shift
in the way parent Gartmore Investment Management handles
client service. Gartmore initially discussed alternative roles at the
firm with Attenborough, but “after 15 years, he’s decided to leave
Gartmore,” said Vee Montebello, spokeswoman in London. “I’m
sure he’ll resurface because he’s very popular.” Attenborough
could not be reached by press time.
The sales and marketing of Gartmore Riverview to both
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European and U.S. clients will be handled out of New York,
where the investment team is based, and overseen by John
Gallagher, managing director of Riverview. European investors
“want to have access to the Riverview platform and the people
who run it,” said Montebello. The change follows a review
conducted by Charles Beazley, head of institutional and
alternative investments in London.
Germany Creates Rules For Hedge
Fund Investments By Insurers
Germany’s regulator has adopted rules on how insurance
companies can invest in hedge funds. The rules apply to
secured money, which is the capital firms hold in reserve to
meet insurance payouts. The rules are the Bundesanstalt für
Finanzdienstleistungsaufsicht’s interpretation of a new
German law enacted in August that allows insurers to invest
up to 5% of their capital in hedge funds, said Ben Fiszher,
spokesman. The BaFin rules state that, although a firm can
invest 5% in hedge funds, no more than 1% of its capital can
be in a single hedge fund and it cannot invest in more than
two funds from the same manager, said Fiszher. “So effectively
there must be at least five separate funds from three
managers,” he noted.
The rules are intended to ensure firms’ hedge fund
investments are diverse and they will not lose too much if a single
fund or manager collapses. Insurers are allowed to invest the
whole 5% in a fund of funds because these funds are lower risk,
Fiszher said. Firms manage secured money like an investment
fund, but there are strict restrictions on what they can invest in.
The BaFin sent copies of the new rules to insurance companies
last week and the rules are effective immediately.
London Firm Seeks Acquisitions,
Launches Fund
U.K. firm Integrated Asset Management (IAM) is looking to
acquire other funds of hedge funds. Separately, the firm’s fund
of funds subsidiary, GAIM Advisors, is also this month
launching its fourth fund of funds, which will be a global
long/short vehicle.
The firm acquired Appleton International, which managed
around $60 million, about a year ago for about £1.5 million.
IAM now hopes to greatly expand through further
acquisitions; the firm has assets of approximately $500
million, half of which is in funds of funds, with the rest in its
institutional broker business. The firm’s infrastructure could
easily manage $1 billion, said Emanuel Arbib, chief executive.
It is seeking to acquire funds of funds with $100-300 million
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September 13, 2004
under management. IAM hopes to make at least one
acquisition within the next six months. The firm is working
with Kidron Corporate Advisors, a New York-based
investment banking boutique, he said. The fund of funds
market is saturated at present and needs to consist of fewer,
larger firms, Arbib argued.
The new global long/short fund of funds carries a 1.75%
management fee coupled with a 10% performance fee. It has a
€100,000 investment minimum. The firm’s existing multistrategy, market neutral and European-biased funds of funds
have a minimum of €10,000, but these are offshore funds,
whereas the new fund is domiciled in Ireland. It contains
around 25 managers.
Mark Segall, chairman and ceo of Kidron, was traveling and
unavailable to comment.
SEB Preps European Offering
SEB Invest is launching a hedge fund of funds that will be
distributed in the Scandinavian countries, Germany, Poland
and the Baltic States. It will be launched in the last quarter of
this year, said Hans Ek, head of communications. The fund
will be domiciled in Luxembourg and distributed in all its
operating countries.
SEB plans to launch different segments of the fund of funds,
said Ek. The fund will be sold as both an institutional and unitlinked product with daily trading capabilities, allowing access
to retail customers. The firm launched its first fund of funds
last summer, which garnered €45 million in assets and
prompted SEB to bring out a second offering, explained Ek.
The minimum investment will be €5,000. SEB has €50 million
in assets under management.
UBS Preps Novel Fund of Funds
With Inflation Link
Structurers at UBS in London are looking to launch a fund of
hedge funds product with an innovative inflation-linked payoff
in the next three months. Several investment products offering
private banking clients the best of inflation or equity indices
have been brought to market in the last two or three months,
but the UBS structure combining fund of funds and inflation
is thought to be the first of its kind. Rising commodity prices
have caused fears of inflation, making these products
interesting for private bank clients and high-net-worth
individuals, said structurers.
UBS has priced both a best of structure pitching the fund of
funds against inflation and an out-performance structure, which
pays investors the fund of funds returns and uses an outperformance option to add either an inflation or an interest rate
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component. Camilla Du Boulay, marketer in the risk
management products group, said marrying inflation with a fund
of funds underlying rather than equity will give the product
added appeal to private banking clients.
Alternative Investment News
explained Perkins.
Ilex will look to soft-close its fund at $150 million and will
probably hard-close it at $300 million, said Thorp. “It makes
you think about what the next step will be. There are all sorts of
different ways we could develop,” he continued. “Do we want to
stay as we are? Do we want to be the next Man Group? Or one
huge single-manager fund?” An existing investor has expressed
interest in investing in an Ilex-run long-only fund if the firm
opted to develop one, but no decision has yet been made, added
Thorp. “Anything we decide to do is unlikely to happen
overnight,” said Perkins.
British Firm Seeks Analyst
London-based hedge fund firm Ilex Asset Management is
looking to make a research hire. The firm manages a
$100 million European credit opportunities fund. It has
tended toward a top-down macro approach but, as the fund
has grown, Ilex now feels it could strengthen its bottom-up
analysis, said Simon Thorp, cio. In turn, this may lead to the
need for another portfolio manager as the firm grows, said
Thorp, who runs the credit fund with James Sclater, senior
portfolio manager.
Ilex is also considering its next move as it seeks to expand its
business. The firm has recently brought on board Ian Perkins as
non-executive chairman. Perkins is also chairman of Londonbased King & Shaxson Bond Brokers. He joined Ilex about a
month ago and is focused on developing the business, allowing
Thorp and Sclater to concentrate on running the fund,
PSAM Hires Risk Arbitrage Analyst
P. Schoenfeld Asset Management (PSAM), which manages
around $700 million, has hired Koray Ozdemir as risk arbitrage
analyst. Ozdemir will join the firm on Sept. 20 and will be based
in the firm’s London office, said an official close to the firm.
Ozdemir was an analyst at research firm and institutional
broker/dealer Cathay Financial. Spokesmen at Cathay and
PSAM declined to comment. Ozdemir was on gardening leave
and could not be reached.
Search & Hire Directory
The following directory includes search and hire activity for the week. The accuracy of the information, which is derived from many sources, is deemed
reliable but cannot be guaranteed. All amounts are in US$ millions unless otherwise stated. To report manager hires and new searches, please call
Mark Faro at (212) 224-3287, Emma Trincal at (212) 224-3648 Jennifer McCandless (212) 224-3615 and Robert Murray at 44 (0)207
303 1705 or fax (212) 224-3939.
Potential Searches
Fund & City
Mandate
Size
(Mlns)
Total
Amt (Mlns)
Fund
Type
Consultant
Comments
AUD170
Corporate D.C.
Global/ Alternative
N/A
Mark Thomas, Van Eyk
Research, Sydney, Australia
Fund plans to invest in absolute return strategies
later in 2004 or in early 2005.
DKK24,600
Union/Multiemployer D.C.
Global/ Alternative/
Derivatives/Futures
N/A
None
Will consider using interest rates swaps, repos, stock
lending and put options to add value and reduce risk
after a new portfolio management system is installed
by year-end.
Public D.B.
Global/ Alternative/
Private Equity
EUR75
None
Fund has decided to focus on single manager private
equity funds and will hire up to three more
managers by end-2004.
USD75
Marco Consulting Group,
Chicago, IL
Fund will likely launch a search for two or more hedge
fund-of-funds managers in the next 3-6 months.
Australasian Conference Association
Superannuation Trust-Australia,
Sydney, Australia
Industriens Pensionsforsikring,
Copenhagen, Denmark
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Assignment
Service Employees International
Union, Washington, DC
USD1,453
Union/Multiemployer D.B.
US/ Alternative/ Hedge
Fund-of-Funds
United Food & Commercial Workers
Benefit Plan of Northern CA,
Walnut Creek, CA
USD4,270
Union/Multiemployer D.B.
US/ Alternative
N/A
New England Pension
Consultants, Atherton, CA
Fund is said to be looking at hedge funds and
private equity. No timeframe set.
Franklin W. Olin College of Engineering,
Needham, MA
USD400
Endowment
US/ Alternative
N/A
N/A
Plans to diversify by expanding into alternatives over the
next 6-12 months.
Pacific Lutheran University, Tacoma, WA
USD50
Endowment
US/ Alternative/ Hedge Fund
N/A
N/A
School has terminated Wurts & Associates as its
consultant and plans to hire a new firm by Oct. New
consultant will assist in hedge fund searches.
USD1,500
Public D.B.
US/ Alternative/
Hedge Fund-of-Funds
Unknown
Plan will search for a hedge fund-of-funds manager in
Oct. 2004. No timeframe for selection.
New Searches
San Antonio Fire & Police Pension
Fund, San Antonio, TX
USD75
Copying prohibited without the permission of the publisher.
11
AIN.09.13.04
9/9/04
6:52 PM
Page 12
Alternative Investment News
www.iialternatives.com
September 13, 2004
News Searches (cont’d)
Mandate
Size
(Mlns)
Total
Amt (Mlns)
Fund
Type
Consultant
Comments
W. K. Kellogg Foundation,
Battle Creek, MI
USD6,500
Foundation
International/ Alternative/
Private Equity
N/A
Cambridge Associates,
Boston, MA
Planning to invest in international private equity. No
timeframe for mandate size or hiring managers.
W. K. Kellogg Foundation,
Battle Creek, MI
USD6,500
Foundation
International/ Alternative/
Hedge Fund
N/A
Cambridge Associates,
Boston, MA
Planning to invest in international hedge funds. No
timeframe for mandate size or hiring managers.
CAD8,700
Corporate D.B.
International/ Alternative/
Private Equity
N/A
None
Fund has not finalized on a possible allocation to
international private equity as yet.
No timeframe set for decisions.
Colleges of Applied Arts & Technologies CAD4,000
Pension Plan, Mississauga, ONT
Corporate D.B.
Global/ Alternative/
Hedge Fund-of-Funds
CAD350
Russell/Mellon Canada,
Toronto, ONT
Fund plans to invest CAD350 million in hedge fund-offunds. Searches are possible later in 2004 or in early 2005.
Colleges of Applied Arts & Technologies CAD4,000
Pension Plan, Mississauga, ONT
Corporate D.B.
Global/ Alternative/ Private
Equity Fund-of-Funds
CAD200
Russell/Mellon Canada,
Toronto, ONT
Fund plans to allocate a minimum of 5% of assets to
private equity or real estate. It is more likely to hire private
equity fund-of-funds managers and invest in European
venture capital and buy-out funds. Searches likely by
year-end or early in 2005.
Industriens Pensionsforsikring,
Copenhagen, Denmark
DKK24,600
Union/Multiemployer D.C.
Global/ Alternative/
Overlay
N/A
Unknown
Will be able to hire an active currency overlay manager
after a new portfolio management system is implemented
by year-end. Will not hire a manager until next year or
2006 because the administration of currency
mandates is complex.
Juristernes og Økonomernes
Pensionskasse, Copenhagen, Denmark
DKK23,000
Public D.C.
Global/ Alternative/
Hedge Fund
EUR150
Casper Simonsen Kirstein
Finansradgivning,
Copenhagen, Denmark
Will discuss whether to invest in hedge funds during the
second half of 2004. A potential mandate is likely to be
under 5% of assets. Will set next year’s asset
allocation in Nov. 2004
New Hampshire Retirement
System, Concord, NH
USD4,500
Public D.B.
US/ Alternative/
Venture Capital
N/A
Milliman USA,
San Francisco, CA
Interviewing managers. Will select one or more
managers at the end of 2004.
Oklahoma City Employees Retirement
System, Oklahoma City, OK
USD399
Public D.B.
US/ Alternative/
Hedge Fund-of-Funds
N/A
Asset Consulting Group,
St. Louis, MO
Finalists selected: AIG Global Investment Consulting and
Pacific Alternative Asset Management. Will interview the
firms on Sept. 13, 2004. May select a manager that day.
Royal County of Berkshire Pension
Fund, Berkshire, UK
GBP960
Public D.B.
Global/ Alternative/ Private
Equity Fund-of-Funds
Scottish Power Pension Scheme,
Glasgow, U.K.
GBP1,500
Corporate D.B.
Global/ Alternative/
Private Equity
N/A
Patrick McCoy, Hewitt
Fund has decided to postpone making an allocation to
Bacon & Woodraw, London, U.K. private equity for now and will be focussing on equity and
bond portfolios. May revisit alternatives at a later stage.
Scottish Power Pension Scheme, .
Glasgow, U.K
GBP1,500
Corporate D.B.
Global/ Alternative/
Hedge Fund
N/A
Patrick McCoy, Hewitt Bacon
& Woodraw, London, U.K.
Fund has decided to postpone making an allocation to
hedge funds for now and will be focussing on equity and
bond portfolios. May revisit alternatives at a later stage.
The Hoover (1987) Pension Scheme,
Wales, U.K.
GBP370
Corporate D.B.
Global/ Alternative/
Hedge Fund
N/A
Adrian Kite, Aon Consulting,
London, U.K.
Fund has decided to revisit its proposal to invest in
hedge funds in 1Q, 2005.
The Hoover (1987) Pension Scheme,
Wales, U.K.
GBP370
Corporate D.B.
Global/ Alternative/
Private Equity
N/A
Adrian Kite, Aon Consulting,
London, U.K.
Fund has decided to revisit its proposal to invest in
private equity in 1Q, 2005.
University of British Columbia
Endowment Fund, Vancouver, BC
CAD700
Endowment
Global/ Alternative/
Private Equity
N/A
None
Plan will discuss investing in private equity at its Sept.
17, 2004 board meeting. No timeframe for decision
on whether to search.
University of British Columbia
Endowment Fund, Vancouver, BC
CAD700
Endowment
Global/ Alternative/
Hedge Fund
N/A
None
Plan will discuss investing in hedge funds at its Sept. 17,
2004 board meeting. No timeframe for decision
on whether to search.
University of British Columbia Staff
Pension Plan, Vancouver, BC
CAD600
Endowment
Global/ Alternative/
Hedge Fund-of-Funds
CAD30
None
Plan will discuss investing in hedge fund-of-funds at its
Sept. 17, 2004 board meeting. No timeframe for decision
on whether to search.
Volkswagen Group U.K. Ltd. Pension
Scheme, Milton Keynes, U.K.
GBP100
Corporate D.B.
Global/ Alternative/
Hedge Fund
N/A
None
Fund is conducting an investment review of its entire
portfolio. May lead to investments in hedge funds.
Decisions by end of 2004.
Volkswagen Group U.K. Ltd. Pension
Scheme, Milton Keynes, U.K.
GBP100
Corporate D.B.
Global/ Alternative/
Private Equity
N/A
None
Fund is conducting an investment review of its entire
portfolio. May lead to investments in private equity.
Decisions by end of 2004.
GBP4,500
Public D.B.
UK/ Alternative/ Hedge Fund
N/A
None
Fund’s trustees have favored an allocation to hedge funds.
Fund is currently formulating its strategy and will present
the same at the forthcoming trustee meeting
on Oct. 21, 2004.
Fund & City
Assignment
Updated Searches
Canada Post Corporation Pension Fund,
Toronto, ONT
West Yorkshire Pension Fund,
Bradford, U.K.
12
GBP50
Geoff Singleton, Hymans
Fund plans to raise its under 1% allocation to private
Robertson & Co, Glasgow, U.K. equity to up to 5% of assets by trimming its equity
holdings in the long term. Fund’s investment panel will
discuss the same when it meets on Oct. 18.
Searches are possible.
Copying prohibited without the permission of the publisher.
Project2
8/24/04
2:51 PM
Page 1
GLOBAL ORGANISERS OF INSTITUTIONAL
FINANCE & INVESTMENT CONFERENCES
THE 4TH ANNUAL
UK AND IRISH
PENSIONS AND
INVESTING
SUMMIT
18-19 OCTOBER 2004
FOUR SEASONS HOTEL
DUBLIN, IRELAND
IN COLLABORATION WITH THE IRISH
ASSOCIATION OF PENSION FUNDS
Sponsors Include:
About the Conference:
We are delighted to be hosting our 4th Annual UK & Irish Pensions & Investing
Summit in Ireland’s capital city, and home to our joint hosts the Irish Association of
Pensions Funds (IAPF). The IAPF have worked closely with us in developing a topical
investments focussed agenda, and have integrated their winter benefits conference
into an additional, benefits focussed track of programming on the first afternoon of
the conference.
This year’s programme offers its delegates the opportunity to learn from and
network with experts in the financial management industry including institutional
investors, advisory groups and many of the world's most innovative fund management
professionals. Our esteemed speaker faculty will discuss the current market and
regulatory developments, providing a greater understanding of the challenges and
global opportunities that lie ahead for the UK and Ireland’s institutional investor in
achieving their goal of pensions excellence.
We hope that you will join us for what promises to be another thought provoking
and productive event.
Featured Speakers:
Steve Bee
Head of Pensions Strategy,
SCOTTISH LIFE
Lindsay Tomlinson
Chairman,
THE INVESTMENT MANAGEMENT ASSOCIATION
Alan Pickering
Chairman,
EUROPEAN FEDERATION FOR RETIREMENT PROVISION
(EFRP)
Gerry Ryan
Secretary,
EIRCOM SUPERANNUATION FUND & Chairman,
THE IRISH ASSOCIATION OF PENSION FUNDS
(IAPF)
IAPF members are asked to please register for the event directly with the IAPF
by contacting Diane Mulrennan at the IAPF on: Phone: +353 1 661 2427 / Fax:
(+353) 1 662 1196 / E-mail: info@iapf.ie / IAPF, Suite 2, Slane House, 25 Lower
Mount Street, Dublin 2, Ireland.
For programme information contact:
Richard Valmarana
Phone:
+44(0)20-7779-8044
Fax:
+44(0)20-7779-8396
E-mail:
rvalmarana@imn.org
For ticket and sponsorship information contact:
Imran Vohra
Phone:
+44(0)1772-760232
Fax:
+44(0)1772-760232
E-mail:
ivohra@imn.org
For More Information, Please Visit:
www.imn.org/a667/ainm/
AIN.09.13.04
9/9/04
6:52 PM
Page 14
Alternative Investment News
www.iialternatives.com
September 13, 2004
Completed Searches
Mandate
Size
(Mlns)
Total
Amt (Mlns)
Fund
Type
Consultant
Comments
Baltimore Fire & Police Employees’
Retirement System, Baltimore, MD
USD1,900
Public D.B.
US/ Alternative/
Hedge Fund-of-Funds
USD25
Summit Strategies Group,
St. Louis, MO
Cadogan Management
Baltimore Fire & Police Employees’
Retirement System, Baltimore, MD
USD1,900
Public D.B.
US/ Alternative/
Hedge Fund-of-Funds
USD50
Summit Strategies Group,
St. Louis, MO
Union Bancaire Privée
California State Teachers Retirement
System (CalSTRS, Sacramento, CA
USD114,000
Public D.B.
US/ Alternative/
Venture Capital
USD75
Cambridge Associates,
Boston, MA
Oak Investments
California State Teachers Retirement
System (CalSTRS), Sacramento, CA
USD114,000
Public D.B.
US/ Alternative/
Distressed Debt
USD50
Cambridge Associates,
Boston, MA
Oaktree Capital Management
California State Teachers Retirement
System (CalSTRS), Sacramento, CA
USD114,000
Public D.B.
US/ Alternative/
Mezzanine
USD150
Cambridge Associates,
Boston, MA
Welsh, Carson, Anderson & Stowe
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Public D.B.
Global/ Alternative/
Private Equity
EUR20
None
Bain Capital
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Public D.B.
Global/ Alternative/
Private Equity
EUR20
None
Sagitta Asset Management Limited
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Public D.B.
Global/ Alternative/
Private Equity
EUR25
None
EQT Scandinavia
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Public D.B.
Global/ Alternative/
Private Equity
EUR20
None
Vector Capital
Local Government Pensions Institution EUR15,000
(Kuntien Eläkevakuutus) Helsinski, Finland
Public D.B.
Global/ Alternative/
Private Equity
EUR20
None
Enterprise Investors
Princeton University, Princeton, NJ
USD8,000
Endowment
US/ Alternative/ LBO
USD10
Cambridge Associates,
Boston, MA
Castanea Partners
Yale University, New Haven, CT
Boston, MA
USD11,000
Endowment
US/ Alternative/ LBO
USD10
Cambridge Associates,
Castanea Partners
Fund & City
Assignment
Data provided by iisearches—the premier daily sales and marketing research tool for investment managers. For further information on iisearches’ daily search leads and searchable database of
mandates awarded and lost since 1995, please visit iisearches.com or contact Keith Arends at 212 224 3533 or karends@iinews.com; or Paul Quartly at +44 (0) 20 8487 8284.
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B40901
NAME
TITLE
JANUARY 2004
VOL. V, NO. 1
FIRM
GATE SLAMS ON
MILLENNIUM INVESTORS
FrontPoint Shuts Down
Quant Fund
FrontPoint Partners has
for the first
time liquidated one of its
funds. The
Greenwich, Conn.-based
hedge fund
juggernaut has shut
down the
Quantitative Equity Strategies
(QES) fund.
See story, page 19
ADDRESS
Some investors looking to
get out of an offshore fund
last quarter run by multi-billio
n dollar hedge fund firm
Millennium Internation
al Management found they
were stuck. That’s because
following a guilty plea by
a
former senior trader at the
Millennium Internationa
l
Fund, the fund’s redemption
limits were reached,
(continued on page 25)
At Press Time
Ex-Ranger Manager Readies
Fund
LONGHORNS TO PLOW
INTO ALTS
2
U.S. Searches
CITY/STATE
POSTAL CODE/ZIP
Ispat Inland Considers Mezz.
Search 10
Albuquerque School Weighs
Funds 12
COUNTRY
European Searches
French Insurer Seeks Hedge
Funds
Health Charity Makes Foray
16
16
Bob Boldt
U.S. Manager News
Former Caxton Bond Trader
Returns 19
Amaranth Unveils Changes
20
TEL
FAX
E-MAIL
European Manager News
Quadriga Readies Fund
22
News From Other Ports
Telstra To Tap Managers
25
Departments
Market Focus
Search & Hire Directory
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duplicated in any form or
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Investor’s prior written
consent. Copying of this publication
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may be subject to criminal
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For information regarding
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The University of Texas
System’s $11.5 billion endowmen
t funds are
seeking to add roughly $575
million in new hedge fund
investments this
year. The funds, which are
managed by the University
of Texas
Investment Management
Company (UTIMCO),
currently have a little
over 20% of their assets
allocated to hedge funds,
and the goal is to have
a 25% allocation, said Bob
Boldt, cio. The school is
leaning towards
investing in absolute return
funds over other hedge fund
styles, Boldt
FARALLON FOLLOWS LONE
PINE’S LEAD
ON HIGH-WATER MARK
S
(continued on page 4)
Farallon Capital Manageme
nt, the San Francisco-based
hedge fund behemoth run
Steyer, is the latest hedge
by Tom
fund manager to propose
changes to its high-water
provisions. As first reported
mark
on AIN’s Web site, www.iialter
natives.com, the move would
the firm in line with a growing
put
number of funds adopting
changes first proposed last
by Tiger cub Lone Pine
Capital that allow hedge
fund managers to earn performanc spring
even when their funds are
e fees
under water. Farallon wants
the ability to earn a reduced
(continued on page 26)
KLM TO WEIGH FUNDS
OF FUNDS
The €8 billion KLM Pensioenfo
nds, the Amstelveen-based
pension plan for pilots, crew
members and ground staff
of
KLM Royal Dutch Airlines,
may make its first foray into
hedge funds of funds this
year. Fons Lute, cio of Blue
Sky
Group, the money managemen
t subsidiary of KLM
Pensionenfonds, said he
plans to recommend a 2-5%
allocation to
hedge funds of funds at a
board meeting in April.
Check www.iialternatives
.com during the week for
(continued on page 26)
breaking news and updates.
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AIN.09.13.04
9/9/04
6:52 PM
September 13, 2004
Page 15
www.iialternatives.com
HEDGE FUND
(continued from page 1)
Group at Loomis, Sayles & Company. It also offers as a balance
to the high alpha fund of funds, the Lattice Passive Index
Completion Strategy, which invests in securities not covered by
the hedge fund of funds. The passive portfolio in theory has
reduced risk as it does not include the most volatile sectors and is
less costly than an active long-only portfolio as it carries lower fees
and has less turnover. Additionally Lattice harvests losses from the
passive portfolio to balance the tax inefficiency of the hedge fund.
The strategy is targeted at ultra-high-net-worth individuals and
taxable institutions. Lattice Growth Partners has a $3 million
minimum and carries fees of 1.5% for management and 10% for
performance. The integrated approach has a minimum of $10
million for private clients and $20 million for institutions.
Lattice is positioning the strategy as the next generation of
investing, and market watchers concede it just may be. They
note the concept is cutting edge and something various firms
have been talking about trying to put together for the last few
years.
—Mindy Rosenthal
EX-DIM
(continued from page 1)
it has proposed to treat individual hedge fund investors as
“clients” of the advisor. If it cannot do that, the proposed rule
becomes illegal.
This coupled with more vehement opposition from Federal
Reserve Board Chairman Alan Greenspan only makes the
commissioners’ task harder by saying that what they were trying
to do would not achieve their goal of stopping fraud.
“Congress did not define ‘client’ in the Act,” the letter said,
“but it plainly understood that term to mean an entity to which
advice is given, not the passive investors in such entity who are
not being advised individually.”
On Wednesday the comment period ends and prompt final
action had been expected after that. But now both developments
gave fresh arguments to the two commissioners who are strongly
opposed to the rule—Cynthia Glassman and Paul Atkins. “The
letter speaks for itself,” said James Anderson, a partner, with
Smythe, at Wilmer Cutler Pickering Hale and Dorr. Smythe
was unavailable for comment. Anderson, along with another
partner, Louis Cohen, co-signed the piece.
Greenspan’s remarks, made in a written reply to a question from
Sen. Mike Crapo (R-Idaho), increased the SEC’s vulnerability on
its political flank. When SEC Chairman William Donaldson was
asked by senators in July to account for the discrepancy between
his view and Greenspan’s hostility to making hedge fund advisors
register, Donaldson replied that only the SEC was concerned
about the integrity of markets. The Fed chairman told the senator,
“The information reported to the SEC by registered advisors is
Alternative Investment News
very limited and would be of little value [for deterring fraud and
market manipulation]. Nor are examiners likely to uncover much
fraud.” Capitol Hill already is listening to the hedge fund industry
and Greenspan’s remarks could fuel more interest there in resisting
the SEC’s planned action.
—Stan Wilson
NEW HAMPSHIRE
(continued from page 1)
following year [2006].” He also noted that it’s too early to say
where the funding for the new fund of funds managers would
come from. The fund’s consultant, Evaluation Associates, would
conduct a shortlist search for the fund, which does not issue
RFPs when hiring new managers.
—Johanna Marmon
FREIDHEIM’S NEW
(continued from page 1)
Baer, according to a letter Freidheim wrote to investors.
Four of Freidheim’s Och-Ziff colleagues will join him as
founding partners: Soohyung Kim and Nicholas Singer, senior
analysts in New York, Lucien Farrell, senior analyst in London,
and Jerry Bias, head trader in New York. Also joining the firm
will be Joseph Kaplan, senior analyst, and Robert Lentini,
senior trader.
In addition, Robert Bodey will be financial director and
controller, joining from Moore where he was chief administrative
officer and cfo for affiliates in New York and Japan. Susan De
Maio will be treasurer and in charge of credit and counterparty
services. She joined from Andor where she was v.p. of operations
responsible for prime broker and counterparty relationships.
Finally, Mark Linnan, who oversaw business development at
Julius Baer in Zurich, will be coming on board to head investor
relations and marketing.
Freidheim currently manages the $1.2 billion Credit
Opportunities Fund (AIN, 8/30), which he will take with him. The
fund constitutes a mix of distressed debt, capital structure arbitrage
and long/short credit strategies. Och-Ziff and well-known manager
Dan Och will not be involved with the management of the new
venture, but Och will be an investor in the fund. Freidheim is
planning to reveal further information to investors on Wednesday
when he conducts a conference call, according to the letter.
Calls to Och, Freidheim and the future members of the new
venture were not returned. Spokesmen for Andor, Moore and
Julius Baer did not return calls.
—Emma Trincal
Quote Of The Week
“I would doubt that hedge funds would be seen as an attractive
entry point because a lot of money has been chasing these
opportunities”—Steven Huber, cio of Maryland State Retirement &
Pension System, on why the plan will not likely consider hedge funds
any time soon (see story, page 6).
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