Hedge Fund Alert - University of Virginia

HEDGE FUND
The Weekly Update on the Alternative-Investment Community
www.HFAlert.com
APRIL 23, 2003
6 CAPITAL-INTRODUCTION PLAYERS
2 Macro Player Opens to Outsiders
3 JP Morgan Preps Registered Vehicle
3 Swiss Firm Touts New Marketing Unit
3 Manager Seeks ‘Mutual-Fund Timers’
3 Investorforce Briefs Brokers on Marketing
4 LATEST LAUNCHES
Tiger Vet Establishing Multi-Manager Venture
A Tiger Management alumnus who most recently ran the University of
Virginia’s $1.7 billion endowment is setting up a fund-of-funds operation.
Michael Bills is eyeing an elite group of hedge-fund managers for the planned
fund, called Bluestem Partners. He intends to start trading the Charlottesville, Va.,
entity in July with an undisclosed amount of capital. The fund — whose principals include Tim Davis, a former hedge-fund analyst at the University of Virginia
— expects to take in as much as $200 million of additional cash on Jan. 1, 2004.
Bluestem won’t disclose the identities of the funds that will receive its allocations. But Bills’ membership in the fraternity of Julian Robertson’s prolific “Tiger
cubs” is expected to give him access to many of the industry’s top players.
For that reason, and because the University of Virginia’s endowment raked
in large profits and made heavy hedge-fund bets under Bills’ guidance, Bluestem
will probably have an easy time attracting investors. Bills initially joined Tiger
See TIGER on Page 6
Team Puts Finishing Touches on Arb Fund
THE GRAPEVINE
Jason Huemer has left his post as chief
operating officer at York Capital to join
Synthesis Asset Management, a $1 bil-
lion fund-of-funds shop in New York.
Huemer started at Synthesis on April
15. Word has it he’ll spend some of
his time there helping to build an
operation that will seed start-up fund
managers. Huemer had been at York,
an event-driven shop in New York, for
three-and-a-half years.
New York asset-management firm
Neuberger Berman has lured Barbara
Doran from Selalu Partners, a hedgefund marketing concern. Doran joined
Neuberger April 20 as an institutional
sales staffer selling the firm’s stock
research to hedge funds. She reports
to the head of Neuberger’s equity division, Jack Rivkin, who she once worked
for at Lehman Brothers. By jumping to
Neuberger, she has given up her partSee GRAPEVINE on Back Page
The former head of HBK Investment’s Japanese unit is getting ready to start a
global multi-arbitrage fund with three partners.
Bill Park expects to start trading his Aviator Partners and its non-U.S. companion, Aviator Overseas, on July 1 with $100 million. He and his partners will
manage the vehicles through their New York firm, Aviator Fund Management.
They will close the vehicle to new investors on July 1, but continue to accept
money gradually from the original investors. They expect to have $250 million
under management at yearend.
Aviator aims to produce average annual returns of 12-15%, after fees equal
to 2% of assets and 20% of profits. It has a minimum investment requirement
of $1 million. The partners hope to distinguish themselves based on their expertise with various arbitrage techniques, shifting the firm’s capital among the
strategies and adding new ones as needed. Park, who worked as a portfolio
See TEAM on Page 6
Partners Shut Down Firm After Two Decades
Dallas hedge-fund shop Regal Asset Management has shut down.
The 19-year-old firm returned $300 million this month to investors in Regal
Trading Partners because partners Howard Rachofsky and Beau Purvis are retiring,
said president Bill Ward, who is leaving the firm to start his own fund.
The managers decided to end their short-term trading operation after Regal
Trading lost about 2.5% in 2002 — the first calendar-year loss it suffered since
a 4% drop in 1984, it’s first year of operation.
Ward plans to launch Headstream Value Partners on May 1, probably with $50
million. Joining him will be Josh Smith, one of Regal’s top portfolio managers.
Smith’s investments in small- and mid-cap value stocks generated average
annual gains of 23.5% during his eight-and-a-half years at Regal. Smith will
serve as Headstream’s lead portfolio manager, although Ward will participate in
stock selection. Headstream will have more of a long bias than Regal. ❖
April 23, 2003
HEDGE FUND
2
senior fund manager Fergus Murison —who are co-managing
the fund — will seek average annual returns of 20%, after
A U.K. firm is accepting outside capital for a globalfees equal to 1.5% of assets and 20% of profits. Emergent
macro vehicle it has been incubating for the past 10 months
Cosmopolitan has a minimum investment requirement of
with impressive results.
$500,000, subject to the managers’ discretion.
Emergent Asset Management eventually hopes to run $1
The managers intend to hold four to six positions within
billion via its Emergent Cosmopolitan Macro Fund, which it
each of two to five strategies at any given time, making leverofficially launched last month with just $7.5 million of capaged investments in stocks, bonds, commodities, currencies
ital. Since Emergent started trading the entity on June 1,
and derivative instruments.
2002, it has produced a net gain of 38.7%.
Murrin, who helped start the firm in 1996, brings a
Going forward, chief investment officer David Murrin and
diverse background to the fund. He briefly worked in oil
exploration in Papua New Guinea
before joining J.P. Morgan in 1986.
While at J.P. Morgan, Murrin traded a variety of products before
starting the bank’s European market-analysis group in 1991. He left
the bank in 1993 to start his own
firm, Apollo Analysis. He is also a
military historian.
Murison has held high-level
positions in the global capitalmarkets groups at J.P. Morgan,
HSBC
and
Tokyo-Mitsubishi
International, where he worked
most recently as the head of all
sales and trading activity. He is
trained as an accountant and specializes in bonds, as well as interest-rate and currency derivatives.
Emergent Cosmopolitan is the
third fund for Emergent Asset
Management, which is 10%
owned by Toronto-Dominion Bank
and has never sought outside capital before. The firm currently runs
$40 million. Its oldest fund,
Emergent Alternative, has produced
an average annual return of 11%
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April 23, 2003
HEDGE FUND
JP Morgan Preps Registered Vehicle
J.P. Morgan Chase’s alternative-investments unit is gearing up to start trading an SEC-registered fund of funds at
midyear.
The J.P. Morgan Atlas Global Long/Short Equity Fund, managed by senior analysts Mihir Meswani and Aamer Zahid, will
attempt to outperform Morgan Stanley Capital International’s
MSCI World Index by allocating money to 12 to 20 hedge
funds.
Atlas Global has a minimum investment requirement of
$2 million. Investors must pony up at least $100,000 for each
additional installment.
The number of multi-manager funds that are registered
with the SEC is growing rapidly. Many are trying to reach
individual investors who want the extra disclosure that
comes with registration. But some public hedge funds are
seeking pension-fund investors whose holdings of unregistered investments are limited by law. ❖
Swiss Firm Touts New Marketing Unit
A financial-services firm in Geneva is seeking hedge-fund
clients for a marketing business that it just launched.
The five-year-old firm, called Sphinx Consulting, is particularly interested in representing long/short, global-macro
and convertible-arbitrage funds. It’s primarily interested in
entities that produce the consistent returns favored by its
Swiss institutional investors.
Sphinx’s plan is to represent just one fund in each strategy. In exchange for its services, it will charge an up-front
retainer and will take a cut of the annual management and
incentive fees applied to the capital it places with its fund
customers.
The new venture is headed by Edward M. Karr, Sphinx’s
capital-markets manager. Two other Sphinx employees currently work under him, and the firm may hire additional
staffers for the effort.
Sphinx performs a variety of services for its clients,
including accounting, trustee, private-banking and assetmanagement work. To avoid conflicts of interest, it won’t
recommend its hedge-fund clients to its asset-management
customers. ❖
3
based on market conditions.
Wimbledon is emphasizing managers who invest in overseas funds, as opposed to vehicles that trade only U.S. stocks.
Such mutual-fund timers often plow money into international funds just as the stock market closes in the U.S.,
attempting to exploit the impact overseas.
Wimbledon Timing currently has more than $21 million under management. Weston believes the vehicle’s size
will more than triple in the near future, based on the
changes it made on April 1. ❖
Investorforce Briefs Brokers on Marketing
Investorforce’s newest side business is quickly gaining
steam.
In January, the Wayne, Pa., company started advising brokerages on how to market hedge funds to investors without
running afoul of regulatory restrictions. The service has
already attracted five clients, whose staffers are receiving
basic product-and-sales training, including an explanation
of the strict marketing limits for hedge funds.
The initiative has also helped Investorforce get its foot in
the door for other consulting services, such as helping one
brokerage find a new manager for a fund of funds it is struggling to run on its own.
Brokerage houses need such consulting, in part, because
their employees need to learn the basics of hedge funds as
investors increasingly clamor for the investment vehicles. It’s
no coincidence that Investorforce started offering the service
the same month that the National Association of Securities
Dealers instructed Wall Street players to take better steps to
ensure that they’re selling hedge funds to investors with sufficient levels of sophistication.
Investorforce is known mostly for its analytics tools that
investors use to compare returns of traditional money managers and the Investorfoce database of hedge funds, formerly known as the Altvest database. It also sells marketing services to money managers. ❖
Checking out a fund manager?
Sizing up a service provider?
Manager Seeks ‘Mutual-Fund Timers’
Weston Capital Management has rejiggered its two-year-old
Wimbledon Timing, a vehicle that allocates money to so-
called mutual-fund timers.
The Westport, Conn., firm recently added two unidentified funds to the Wimbledon portfolio. Until it made those
additions, Weston was funneling all of the portfolio’s capital
to just one mutual-fund timer. It’s seeking to allocate money
to other hedge-fund managers who whip money among
stock and bond mutual funds, as well as cash positions,
Instantly find whomever or whatever
you’re looking for by searching
Hedge Fund Alert’s archives at
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HEDGE FUND
April 23, 2003
4
LATEST LAUNCHES
Hedge Funds
Portfolio managers,
Management company
Fund
Aviator Partners/Aviator Overseas
Domicile: U.S. and Cayman Islands
☛ SEE PAGE 1
Bill Park
Aviator Fund Management,
New York
ir@aviatorfund.com
Strategy
Service providers
Global multi-strategy
arbitrage
Prime broker: Morgan Stanley
Law firm: Schulte Roth
Auditor: PricewaterhouseCoopers
Launch
Date
Equity at
Launch
(Mil.)
July 1
$100
March 1
$7.5
Emergent Cosmopolitan Macro Fund David Murrin and Fergus
Global macro
Domicile: Bermuda
Murison
Emergent Asset Management,
☛ SEE PAGE 2
London
44-142-865-6966
Prime broker: Citigroup
Law firm: Eversheds
Auditor: Deloitte & Touche
Administrator: Citco
KingsGate Life Sciences Fund
Domicile: U.S.
Chris Wolf, Kevin Wenck and
David Gershon
KingsGate Capital
Management, San Francisco
415-908-8200
Life sciences
Prime broker: Banc of America
Law firm: Shartsis Friese
Auditor: Rothstein Kass
April 1
Headstream Value Partners
Domicile U.S.
☛ SEE PAGE 1
Josh Smith and Bill Ward
Headstream Asset
Management, Dallas
214-890-8860
Long-biased
Prime broker: Banc of America
Law firm: Akin Gump
Auditor: KPMG Peat Marwick
Administrator: J.D. Clark
May 1
$50
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HEDGE FU
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The We ekl
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Upd ate
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April 23, 2003
HEDGE FUND
Team ... From Page 1
manager at HBK for five years, is the lead portfolio manager
at Aviator. He’ll run the planned fund’s catalyst-driven and
relative-value volatility arbitrage investments.
Also running the portfolio will be Koji Takasumi and Eric
Wong. Takasumi was a co-portfolio manager and Japanese
equity-derivatives trader at KBC Financial Products in Tokyo.
He will run Aviator’s statistical-volatility arbitrage investments. Wong had been a convertible-arbitrage trader and
co-portfolio manager at Angelo, Gordon & Co. in New York.
He will manage the fund’s convertible-arbitrage and capitalstructure arbitrage bets.
The firm’s fourth partner is Peter Sparks, a former information-technology project manger at Goldman Sachs. Tony
Tran, previously an auditor at PricewaterhouseCoopers, is
Aviator’s controller. ❖
Tiger ... From Page 1
in 1986. He was serving as head trader
when he left in 1992 to teach at the
University of Virginia. He returned to
Tiger as chief operating officer in 1996
and remained at the firm until 1999.
He remains one of three members on
the advisory board of Tiger alumnus
Steve Mandel’s Lone Pine Capital of
Greenwich, Conn., and serves as fund
liquidator for Tiger veteran Andreas
Halvorsen’s New York-based Viking
Global.
At the University of Virginia, where
he worked as chief investment officer
of the unit that manages the endowment from 2001 until January 2003,
Bills ran $1 billion of hedge-fund
investments — an amount equal to
60% of the school’s investments.
That’s the largest hedge-fund allocation of any university endowment.
During the 2002 fiscal year, which
ended June 30, Bills’ hedge-fund bets
paid off extremely well, producing a 7.7% return, after fees.
Those gains offset losses among the university’s stock investments, helping the endowment achieve a virtually flat return
for the year.
The endowment also fared well against its peers.
According to a Cambridge Associates survey covering results
ending Dec. 31, 2002, the University of Virginia’s one-year
gain of 0.3% and three-year average of 9.3% made it the top
performer in the group. The survey didn’t include the
endowments of Yale University, Stanford University or
Rockefeller University.
Meanwhile, the University of Virginia is in the process of
selecting a recruiting firm to find a replacement for Bills. For
now, his duties are being handled by Alice Handy, president
of the Investment Management Co., the unit that runs the
endowment’s money. ❖
Capital-Introduction Players
The dozen banks listed below employ capital-introduction units that
connect well-heeled investors with current or aspiring hedge-fund managers. Prime-brokerage groups rely heavily on their capital-introduction
staffs to win fund managers as clients — relationships that can prove highly
profitable to the brokerage firms. Investor contacts for the capital-introduction units are shown below. If there is a designated contact for European
investors, that name is also included.
Brokerage
ABN Amro
Banc of America
Barclays Capital
Bear Stearns
Citigroup
Credit Suisse First Boston
Deutsche Bank
Goldman Sachs
An advertisement placed in
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6
Lehman Brothers
Merrill Lynch
Morgan Stanley
UBS Warburg
Matchmaker
Joe Young
Peter Burrus
Typhaine Zagoreos (Europe)
Rosemarie Lakeman
Jamie Phillips (Europe)
Bill Ullman
Pari Rajkotia (Europe)
Dan Lancellotti
Paul Radley (Europe)
Bob Leonard
Rod Barker
John Dyment
Christy York (Europe)
Tom Lynch
Tim Morgan (Europe)
Laurie Stearn
Kevin Dunleavy
Dave Barrett
Martin Byman (Europe)
Joe Pescatore
Tyne Cameron and
Melissa Carnathan (Europe)
Telephone
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HEDGE FUND
April 23, 2003
8
as director of tax and estate planning.
Schmitt previously ran his own law
practice in Green Bay, Wis.
THE GRAPEVINE
... From Page 1
nership in Ridgefield, Conn.-based
Selalu. Her former partner, Donna
Anderson Schole, will continue to run
Selalu.
ance updates. It would do so through
its Center for International Securities
and Derivatives Markets, which oversees the Zurich Alternative Investment
Performance Database of 2,500 hedge
funds and managed-futures vehicles.
The center supplies data to various
academics, Mar/Hedge (the former
owner of the database) and Strategic
Financial Solutions, which uses the
information for its PerTrac 2000 SE.
Wealthy families are sticking with
their hedge-fund investments, according to a joint survey by Naples, Fla.,
fund-of-funds shop LJH Global
Investments and the Institute for Private
Investors, a New York-based organization of 300 rich families. Of the 71
families that responded to the survey,
37 said they planned to expand their
hedge-fund holdings this year. They
currently allocate an average of 18%
of their portfolios to hedge funds,
compared to 34% for stocks and 20%
for bonds, the survey found.
Irv Kessler is rapidly building up his
new hedge-fund firm, Provident
Advisors. The two-month-old Wayzata,
Minn., shop already employs 12
staffers, including eight analysts,
traders and portfolio managers. Kessler
intends to add even more staff as he
prepares to start marketing a fund to
investors in early May. He expects to
start trading the vehicle on July 1.
Kessler is best known as the founder of
Deephaven Capital Management, a $1.2
billion multi-strategy hedge-fund
shop. He left the firm in 2001, after
selling it to Knight Trading.
CALENDAR
May 12-14: London is the venue for
Terrapinn’s “Hedge Funds World London
2003.”
44-207-827-5997
www.hedgefundsworld.com
Strategic Financial Solutions has added
the MSCI Hedge Fund Indices to its
performance-analysis software,
PerTrac 2000 SE. MSCI, run by
May 14: Euromoney Business Meetings
holds a “Meet the Investor Forum” in New
York.
44-207-779-8439
business-meetings.co.uk
Morgan Stanley Capital International,
tracks the performance of more than
1,500 hedge funds. It represents the
11th group of indices included in the
PerTrac software, which allows users
to compare the performance and
characteristics of hedge funds.
Sumnicht & Associates, an Appleton,
Wis., firm that advises wealthy
investors, has added two staffers. Rob
Riedle joined this month to head business development and provide financial-planning advice to the firm’s
clients. Sumnicht, which has $100
million of its $300 million allocated
to hedge funds, also added Joe Schmitt
May 14-15: Strategic Research Institute
presents a New York conference titled,
“Combined Summit on Credit Derivatives and
CDOs.”
888-666-8514
srinstitute.com
A University of Massachusetts research
center hopes by next year to start
releasing weekly hedge-fund perform-
To view the full conference calendar, visit
The Marketplace section of HFAlert.com
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