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AIN102405
10/20/05
6:15 PM
Page 1
Youth Movement
OCTOBER 24, 2005
VOL. VI, NO. 42
HFR READIES FUND OF EARLYSTAGE MANAGERS
Steinhardt Pulls
The Plug
Ex-JPMorgan credit guru John
Steinhardt, who departed the firm one
year ago to form Spectrum
Investment Group, has apparently
called off the launch of his fund.
See story, page six
HFR Asset Management, the fund of hedge funds giant
with over $4 billion under management, will launch a
fund of emerging managers on Dec. 1. It will debut with
around $500 million and will allocate to 20-25 managers
with less than two years’ track record, said John Godden,
managing director in London. The strategy will seek to
(continued on page 14)
U.S. News
Pirate To Launch Activist Fund
Azimuth Seeks FoF Partners
Highbridge, KBC Take
Registration Plunge
Energy Firm Taps
Goldman Analyst
Institutions Cut Converts Exposure
4
4
4
5
6
European News
Stenham Preps Third
Macro Fund
Eden Rock Makes Redemptions
Aspect Seeks Three Researchers
Titanium To Bolster
Recently-Acquired Macro Team
FRM Plans Aggressive FoF
8
10
10
Departments
Search & Hire Directory
Calendar
13
15
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John Bu, a high-ranking veteran of various Goldman Sachs businesses, will launch the Akana
Capital Fund with $500 million on Nov. 1. The offering will follow a long/short strategy and
invest mainly in Asian equities, according to offering documents. Bu’s New York-based firm,
Akana Capital, was opened earlier this year. Calls to Akana were not returned by press time.
At Goldman, Bu was a member of the principle strategies steering committee, head of its
pan-Asian portfolio and co-head of both the global relative-value and Japan portfolios.
Previously, he was managing director and principal in one of Goldman’s private equity groups
7
8
8
Under The Hood
Idaho Firm Profits From
Utility Stocks
ANOTHER GOLDMAN STAR SETS UP FUND
DKR LIQUIDATING STRUCTURED CREDIT FUND
$4.2 billion DKR Capital is liquidating its $100 million DKR Varick Fund. The firm hopes
to complete liquidation by year-end, at which point its five-person structured credit team will
depart. Concerns about performance—the fund is down about 7% since it launched this
March—drove the decision. DKR created the structured credit team, led by Jawahar
Chirimar, head of credit trading in Asia for Lehman Brothers, earlier this year to launch the
fund (AIN, 2/28).
Varick has underperformed compared to industry benchmarks. The CSFB/Tremont Hedge
Oslo, Texas?
ENRON VET PREPS COMMODITIES PUSH AT
NORWEGIAN I-BANK
Oslo-based investment banking house Pareto is making a push into commodities funds, an
effort spearheaded by Thor Lien, formerly head of Enron’s Nordic unit. The firm has just
started trading a Nordic power strategy and is planning to launch a Cayman Islandsdomiciled fund shortly, said Lien.
Lien helped start Enron’s efforts in the Nordic market and ran Enron Nordic Energy until
the Houston-based parent company’s highly-publicized demise. American Electric Power
Check www.iialternatives.com during the week for breaking news and updates.
AIN102405
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Alternative Investment News
www.iialternatives.com
October 24, 2005
At Press Time
Threadneedle Ponders
Ops Shake-Up
EDITORIAL
TOM LAMONT
Editor
London-based asset management giant Threadneedle
Investments, which manages $1.8 billion in hedge funds, is looking into possible
changes that could be made to the infrastructure of its hedge fund business. An
official at the firm said Threadneedle is considering ways to bring its hedge fund
sales, investment and product development teams closer together. “It’s a question
of capacity and how the team should grow.” The official declined to specify what
options are being considered but stated that no hires have been made.
Another Threadneedle employee told AIN the firm is considering creating a
new role for a head of hedge funds. This individual would unite the hedge fund
business under Lorin Gresser, head of alternative investments. Gresser was not
available to comment at press time and Denis Tumbult, head of marketing, did
not immediately return a call.
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London Bureau Chiefs
September Swoon
Winton Capital Suffers Performance Dip
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Washington Bureau Chief
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London-based CTA Winton Capital Management dropped an estimated 6.5%
last month. A call to David Harding, principal, was not returned but an insider
said the drop in performance was due in part to hurricanes Katrina and Rita.
The news was not all bad, however, as the fund was added to the
CSFB/Tremont Investable Hedge Fund Index on strength of its assets under
management, which last month grew by $90 million to $3.59 billion. The index
consists of the 60 largest open hedge funds not domiciled in the United States. It
is rebalanced bi-annually, with the most recent update coming on Oct. 1.
LYNETTE STOCK, DEBORAH ZAKEN
Managers
CHRISTOPHER BROWN
Chief Executive Officer
Chicago Union Makes FoF Investments
MICHELLE TOM, ILIJA MILADINOV,
MELISSA ENSMINGER,
BRIAN STONE, JAMES BAMBARA
Associates
DAVID E. ANTIN
Chief Operating Officer
Mariner Investment Group, Arden Asset Management, EnTrust Capital and K2
Advisors each received $20 million from the Laborers Pension Fund of Chicago
last week. Investing in funds of hedge funds should reduce the plan’s volatility,
said Fund Administrator James Jorgensen. Marco Consulting Group
recommended all the hires. “We looked at all the funds of funds and saw these
four had diversity, and then we looked to see if there was overlap between the four
funds and saw that their holdings were also different,” said Jorgensen.
Separately, the Teamsters, Local #730 in Washington, D.C., has invited three
hedge fund-of-funds firms to present at its Dec. 20 meeting vying for a potential
$20 million investment. The $250 million fund selected Meridian Capital
Partners, Ivy Asset Management and Arden from a list of eight firms, said
Ritchie Brooks, v.p. The meeting will not necessarily lead to an investment,
however. “We just want to hear what they have to say,” Brooks added.
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Project2
8/29/05
3:41 PM
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AIN102405
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October 24, 2005
U.S. News
Pirate Preps Activist Fund
Pirate Capital, the Norwalk, Conn.based event-driven firm run by
former Goldman Sachs
distressed debt maven Thomas
Hudson, is planning to roll out
an activist fund in January. The
Jolly Roger Activist Fund, slated
to launch with $50 million,
will be made up of activist
positions in the firm’s existing
funds, said Andrew Stotland,
director of sales and marketing. With more capital available, the
$980 million firm will then have an increased ability to make
additional activist investments, he added.
Specifically, the new fund will feature eight-12 of the firm’s
50 total positions. These include an investment in Walter
Industries. The company recently completed an acquisition of
Mueller Water Products, a supplier of flow control products for
the water infrastructure industry. Pirate officials met with
Walter management last week and proposed several initiatives
to increase shareholder value, including selling its finance and
homebuilding subsidiaries and conducting an initial public
offering of 20% of Mueller.
The new fund will have a $2 million investment minimum, a
2% management fee and 20% performance fee. There will be a
soft lockup provision of two years, whereby investors who
redeem in the first year pay a 10% fee and those exiting in the
second year must pony up 5%.
Highbridge, KBC Bite
Registration Bullet
New York’s Highbridge Capital Management and London’s
KBC Alternative Investment Management are the latest large
hedge fund firms to register with the Securities and Exchange
Commission ahead of next February’s deadline. They join York
Capital Management, Och-Ziff Capital Management, Campbell
& Co., Satellite Asset Management and Caxton Associates
among large hedge fund managers that have registered since the
SEC rule went into effect one year ago. The rule requires hedge
fund managers with more than 14 U.S. clients to register as
investment advisers by Feb. 1, unless the firms have lockups of
two years or more for new investors. Some of the biggest hedge
fund firms, including GLG Partners, Citadel Investment Group
and Tudor Investment Corp., have not yet taken this step. Calls
to Highbridge and KBC did not comment by press time.
4
Pa. Convert Arb Manager
Branches Out
Bala Cynwyd, Pa.-based RG Capital Management, which
manages roughly $500 million in convertible arbitrage and
related strategies, is expanding its range. The firm tapped Troy
Hottenstein from UBS to work on new event-driven strategies.
Hottenstein said he would be focusing on special situation and
merger arbitrage strategies, as his background is in those areas.
He was head of an event-driven desk at UBS that dealt with
special situations and merger arbitrage. Hottenstein declined to
elaborate regarding the firm’s rationale for brining him on board,
but said it was not a result of convertible arbitrage generally
being in a rut (see related story, page 6). A UBS sposkesoman
declined to comment.
Azimuth Seeks Joint Ventures
New York-based fund of hedge funds firm Azimuth Trust
Company is seeking joint venture partners. The firm, which
manages roughly $250 million, is seeking other funds of funds
as partners, said Ezra Zask, who was recently hired to head
business development. These partnerships could involve
Azimuth conducting asset-gathering services for another fund of
funds. The firm is also in talks with some parties, including an
insurance company and a major private bank that are interested
in using Azimuth’s manager database to create their own funds
of funds, he added.
Azimuth feels the fund of funds universe is overly crowded
and will eventually contract. While some institutions have
purchased fund of funds firms, there have been few funds of
funds that have acquired their own brethren. This is because
the value of a fund of funds lies in its systems and operations,
which would be duplicated by a firm already in the space, said
Zask. Therefore, it makes sense for funds of funds to seek
partnership agreements with other firms rather than to
acquire firms or launch similar products in a crowded market,
he explained.
Zask was recently brought onboard from Ibbotson
Associates, where he ran a fund of funds advisory service. He
is looking to increase the firm’s assets to around $500 million
in the short-term, with a longer-term goal of $1 billion in two
years’ time. Azimuth initially concentrated on private equity
and hedge funds, but at the beginning of this year new CEO
Terrance Meehan instituted a fund of hedge funds focus, said
Zask. The firm’s other senior members include Todd Petzel,
former cio of the Common Fund, and Bob Litzenberger,
former global risk manager for Goldman Sachs.
4
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October 24, 2005
San Fran Firm Launches Metals Fund
San Francisco-based Marathon Resources Investments has rolled
out a long/short equity fund that focuses on precious metals. The
firm already manages a $25 million long/short natural resources
strategy with roughly 30% exposure to precious metals. The
nascent offering, which so far has $3 million in assets, was
launched to take advantage of current gold market conditions,
explained Robert Mullin, general partner.
There has been a prolonged period where gold prices have
increased, while gold stocks have lost value, something that has
not happened since 1986, said Mullin. This means there are
plenty of value plays in early-stage mining companies that can
be purchased for deep discounts, he explained. There is also a
“big-picture” rationale, as the world’s financial system has been
issuing billions in debt traded over thin amounts of equity. This
is inherently dangerous, because it has only been supported by
a bull market of confidence, said Mullin. If the confidence
wanes, gold will be the asset class that wins, he added.
The fund has a $500,000 investment minimum with a 1.5%
management fee and a 20% performance fee. There is a one-year
lockup provision. The vehicle’s level of volatility does not make it
as attractive to funds of funds, and the firm is instead pitching it
mainly to high-net-worth individuals and family offices, said
Mullin. Since gold investments are designed to hedge against
financial events, investors do not want the gold investment itself
overly hedged, he explained.
N.Y. Energy Shop Hires
Goldman Analyst
Alerian Capital Management, an energy Master Limited
Partnership-focused hedge fund firm, has hired Kenny Feng, an
analyst at Goldman Sachs’ energy and power equity research
group. Feng also covered the gas utilities sector at Goldman. He
joined the firm at the beginning of the month, said Gabriel
Hammond, founder.
Feng’s position was added because the firm believes there will
continue to be a tremendous amount of acquisition activity in
the MLP space that will necessitate private investments in public
equities, said Hammond. “We’re also seeing an increase in the
number of non-traditional energy transportation assets entering
the MLP structure…and need to increase the scope of our
coverage,” Hammond added. The firm is seeking to hire
additional analysts as assets grow and the scope of the assets class
increases. Feng said he decided to join Alerian because he believes
there is a great opportunity to build a long-term business in the
asset class. Andrea Raphael, a spokeswoman for Goldman, did
not return calls by press time.
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Golden State Shop Adds Analyst
Barrington Wilshire, a hedge fund firm in Santa Monica, Calif.,
has hired Kevin McNamara as biotechnology analyst. He joins
from M.S. Howells, broker/dealer headquartered in Scottsdale,
Ariz. McNamara will not be relocating to sunny California
however; he joined Barrington in its Westport, Conn. office, the
same location as his old position. McNamara and Barrington
officials did not return calls.
SEC-Registered Firms Advised To
Review Prime Broker Relationships
Hedge fund managers should review relationships with their
prime brokers because it is one of the things that comes up in
Securities and Exchange Commission inspections, advised
Thomas Biolsi, a managing director at PricewaterhouseCoopers
in New York.
Biolsi told a Practising Law Institute forum that SEC
examiners are concerned about the possible conflicts of interest
that can arise in those relationships.
In a recent inspection, for example, an examiner interviewed
the head of operations and asked for a list of failed trades. The
firm reported a significant number of failed trades with one
prime broker. The head of operations explained that the prime
broker provided very poor execution of one asset class, but the
firm would not dump them because they had helped the firm get
started and had a long-standing relationship. Biolsi did not say
what, if any action was taken against the firm.
Institutions Continue Exodus
From Converts
As convertible arbitrage strategies continue to perform poorly,
institutions are eliminating or reducing their exposure to the
strategy. During the Mid-Atlantic Hedge Fund Association’s
Asset Allocation Program in Philadelphia last Tuesday, Stan
Kowalewski, head of the fund of funds group for $4 billion
Columbia Partners Investment Management, said his firm has
pulled out of convertible arbitrage due to poor performance.
However, Kowalewski noted his firm could move back into the
space in the next six to 12 months if market conditions and
returns improve.
Don Stracke, director of marketing for Bala Cynwyd, Pa.based fund of funds Attalus Capital, said the firm has also
reduced its exposure to converts. Greg Dyra, assistant treasurer
for Vanderbilt University’s endowment, said the university has
also eliminated its exposure to convertibles. Convertible
arbitrage has been the poorest performing strategy tracked by
6
October 24, 2005
the CSFB/Tremont Hedge Fund Index. Converts are down
2.99% year-to-date.
D.O.A.?
Fixed-Income Honcho’s Fund May
Not Happen
John Steinhardt, the former head of credit markets at
JPMorgan’s fixed-income group that departed to form
Spectrum Investment Group last October, has apparently put
his new firm’s maiden fund launch on ice. Industry insiders, one
of whom invested in the fund, said the launch was called off
after Steinhardt’s capital-raising efforts fell short. Steinhardt did
not return calls.
The multi-strategy fixed-income fund was slated to invest in
structured products, asset-backed securities, leveraged fixedincome and correlation trading (AIN, 7/31). Calls to JPMorgan’s
press office were not returned by press time.
Blackstone Snags Arden Sales Big
The Blackstone Group has hired Edwin Conway as a managing
director at its fund of funds group Blackstone Alternative Asset
Management. Conway joined the $9.3 billion firm from Arden
Asset Management last Monday. He reports to Tom Hill, senior
managing director. Calls to Blackstone were referred to a
spokeswoman, who declined to comment.
Conway spent two years at Arden, where he reported to
Stephen Cordy, managing director of client services. Previously,
Conway did a stint at Credit Suisse Asset Management. “We
wish him the best,” said Jonathan Gasthalter, spokesman for
Arden, declining further comment.
San Diego Ponders Adding To Hedge
Fund Roster
The San Diego County Employees Retirement Association will
likely hire more hedge funds managers if a plan to incorporate
portable alpha strategies goes through. The $6.3 billion fund will
spend the next 18 months investigating if a portion of its $1.89
billion fixed-income exposure should be moved to the strategy,
said David Deutsch, cio.
It is unlikely that incumbent bond managers would be
terminated, but they may have their mandates reduced or
changed, Deutsch continued. The plan currently uses TCW
for mortgage-backed securities, PIMCO for global bonds and
TIPS, Ashmore Investment Management for emerging
market debt, W.R. Huff Asset Management and Oaktree
Capital Management for high-yield, Zazove Associates for
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October 24, 2005
high-yield convertibles, Nicholas-Applegate Capital
Management for convertibles and Colchester Global
Investors for global bonds.
Additionally, the fund is scouting for private equity
partnerships to raise its 3.6% exposure to the target 5%.
Rocaton Investment Advisors is the consultant for the alpha
engine and is also the plan’s general consultant. Cambridge
Associates advises on private equity.
European News
Liongate Taps FRM Client
Servicing Head
Liongate Capital Management, the
$170 million London-based fund of funds
firm that topped performance databases last
year, has hired Melanie Herbert as head of
investor relations. She joins from fund of
funds giant Financial Risk Management,
where she held the same role. Herbert is due
Randall Dillard
to join Liongate at the end of the month, said
Randall Dillard, partner. This is a newly-created role and will
create more time for Dillard and Jeff Holland, partner, to focus
on the investment process, explained Dillard. Herbert, who has
already left FRM, was on vacation and could not be reached.
John Capaldi, managing director at FRM, declined to elaborate
on Herbert’s departure.
Stenham Readies Global Macro FoF
Stenham Advisors, the $1.8 billion fund of funds firm, will
launch its third global macro fund of funds on Dec. 1. The firm’s
existing pair of macro funds of funds hold $210 million between
them and are “pretty much closed”, with most underlying
managers refusing to accept capital, explained Harry Wulfsohn,
director in London. “We’re very optimistic about the macro
space over the next 12-18 months.”
The new fund, as yet unnamed, will launch with around $40
million, continued Wulfsohn. It will be a concentrated portfolio,
investing in just seven global macro managers. The firm is
already invested with three of these; the remaining four are new
investments, he said. Stenham plans to grow the fund of funds
steadily, to a few hundred million dollars, he added.
The new macro offering will charge a 2% performance fee and
a 10% performance fee, said Wulfsohn. It will have a relatively
small investment minimum, at around $25,000. Whereas
Stenham’s other funds are domiciled in the British Virgin Islands,
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AIN102405
10/20/05
6:07 PM
Page 8
the firm is looking at Guernsey, where new legislation means it
could be more efficient to run a fund, he said.
Attica Makes Push To Grow FoF
Attica Alternative Investments, the London-based fund of funds
firm, is making a marketing push for a multi-strategy fund of
funds. The Attica Alternative Alpha Fund, which is devoted to
new and niche strategies, has returned 4.2% in its first three
months, said Larry Jones, senior investment manager. Attica is
marketing the fund via one-to-one meetings; most investors are
institutions and high-net-worth individuals, Jones added.
Although there are no specific capacity constraints on the
fund at present, the firm plans to soft-close it when it reaches
$500 million. The firm hopes to grow the fund to $250 million
within a year, and to the $500 million mark within two years, he
continued. The fund has grown to $70 million from $62 million
in July (iialternatives.com, 7/1).
The fund of funds has an unusual fee structure, charging a
20% performance fee with no management fee. Jones said this is
a sign of the firm’s confidence in the strategy, and added that he
hopes this will help the push for assets. “Investors like that
expression of confidence. They like to save on fees because they’re
an issue for the market,” he observed.
Aspect Plans Three Research Hires
London-based Aspect Capital is seeking to
make three additional research hires before
the end of the year. The firm, which
manages $2.5 billion, employs 110 people,
51 of whom are in the research team, said
Anthony Todd, ceo. It is “well on the way”
to filling two of the spots, he added. Todd
Anthony Todd
declined to specify the areas of expertise for
which the firm is hiring.
Aspect has already made eight research hires this year.
Although it has plans to roll out new strategies further down the
road, its focus is on managing its existing funds and enhancing
its infrastructure in preparation for further asset growth,
continued Todd. The firm is in no hurry to roll out new funds—
its most recent launch, a Japan long/short offering, was two-anda-half years ago—but “we have a clear pipeline of research
projects for at least a year,” he added.
The firm has had longstanding plans to launch a U.S.
long/short fund (iialternatives.com, 4/6/2004) and a hedge fund
seeding program (iialternatives.com, 4/4/2004). These are still
both very much in the cards, assured Todd. U.S. long/short is
“a clear contender, but we’ll only launch programs when the
timing is right for the business,” he said, adding that the fund
8
October 24, 2005
could launch next year, or possibly wait until 2007. Aspect is
still “in the build phase” for the seeding program and no visible
progress will be made until September 2006, he stated.
More Acquisitions Likely
Titanium Seeks Traders For Acquired
Macro Fund
Titanium Capital, the $500 million London-based hedge fund
firm, is in the process of hiring two or three traders to complete
the team for its newly-acquired global macro fund. Last week the
firm announced that it has bought the Vizor Macro Fund from
Vizor Investment, and that David Morrison, the firm’s director
and portfolio manager, has moved to Titanium as a partner to
continue managing the fund.
The Vizor fund holds under $30 million but has no real
capacity constraints, and is expected to become a very
significant factor in Titanium’s asset growth, said Philip
Manduca, managing director. Roger Courtenay, who handled
research at Vizor and was previously a senior economist at
the Bank of England, has also joined Titanium. Manduca
said the firm is progressing with the hiring process for filling
the trader slots, and individuals will be lined up in the next
few weeks.
Manduca told AIN last year that his firm was planning to
acquire boutiques (iialternatives.com, 7/23/2004). Vizor is its
first acquisition since purchasing commodity firm Tyrell
Green in early 2004. Titanium is continually in talks with
other firms but it is difficult to find great talent,
acknowledged Manduca. He added that M&A activity will
become more prevalent in 2006: many funds of funds have
seen redemptions which have put pressure on small hedge
fund managers, he observed. Manduca declined to comment
on the specifics of the Vizor deal.
Eden Rock Shuffles Manager Roster
London-based fund of funds firm Eden Rock Capital
Management, with $730 million under management, last
month redeemed its investments from several underlying
managers in its multi-strategy Eden Rock Fund. Edward Horner,
managing director, said the redeemed capital was largely
reallocated to increase existing positions, but declined to
comment on specific managers. Separately, the firm has added
new managers to its Solid Rock Fund, which invests in niche and
younger hedge funds.
The Eden Rock fund redeemed its entire position in a
volatility arbitrage fund “as a result of a lack of confidence in
the manager’s strategy going forward,” according to an
investor document. The firm also removed a merger arbitrage
qxd not used
10/18/05
12:50 PM
Page 1
AIN102405
10/20/05
6:07 PM
Page 10
fund from the portfolio; this position had already been
shrunk earlier this year and the document again cites waning
confidence in the strategy.
The fund of funds’ exposure to an event-driven, small-cap
U.S. equity strategy was reduced. “While we are confident in the
abilities of the manager, we feel that the inherent volatility in the
strategy warrants a smaller holding,” explains the document. The
Eden Rock fund was up 2.12% in September and has returned
7.21% year-to-date. It held 46 managers in September and seven
of these made losses.
The firm added a new volatility arbitrage manager to the
Solid Rock fund at the start of September “and despite low or
declining levels of volatility [the manager] managed to return
1.96%,” says the document. At month-end, the firm upped
its holding with an emerging market debt fund. This had
been closed for some time and “has shown considerable
consistency of returns over multiple cycles,” it continues.
Solid Rock returned 0.82% last month and is up 6.67% yearto-date. Horner said the firm undertakes ongoing due
diligence on a variety of different managers, but declined
to elaborate.
October 24, 2005
FRM Preps More Aggressive
FoF For Q1
Financial Risk Management, the London-based fund of funds
mammoth with $12.4 billion under management, will launch a
more aggressive alternative to its multi-strategy FRM Diversified
fund of hedge funds in the first quarter of 2006.
While the existing offering is conservative and takes as little
market beta exposure to traditional asset classes as possible, the
FRM Strategic fund will be allowed to take more exposure, said
John Capaldi, managing director, head of product management.
It will predominantly invest in long/short managers in the areas
of credit, equity and emerging markets and “will have a positive
exposure to riskier assets, but in a measured way,” he added.
The fund of funds will invest in 30-40 underlying managers
and is expected to launch with $50-100 million. But there are no
specific capacity constraints, said Capaldi. The firm’s standard
fees, namely 1.25% of assets and 10% of performance, will likely
apply. The minimum will be $1 million. The launch will follow
those of two new single-strategy funds of funds, focused on
CTAs and credit (AIN, 10/17).
Under The Hood: AIN’s look inside hedge fund strategies
Idaho Energy Fund Rides Utility
Stocks To Q3 Gain
McOmber Energy Fund, the energy hedge fund run by Boise,
Idaho’s Sawtooth Investment Management, posted solid third
quarter gains on the strength of its long positions in a basket of
utility stocks. The fund returned 5.4% in the quarter and is up
8.41% year-to-date.
The utility basket last quarter made up about 66% of the
fund’s portfolio, according to the firm’s quarterly letter to
shareholders. The basket includes a list of ten-20 names that
portfolio manager Roger McOmber described as “stable
companies with solid yields and safe dividends.” These include
Dominion Resources, Consolidated Edison, Duke Energy and
Southern Company. The remaining 34% of the portfolio was
split almost evenly between yield arbitrage (18%) and balanced
pairs (16%). The pairs strat dropped 2.48% last quarter, while
yield arb gained 2.66%. The long strategy was the fund’s most
profitable in Q3 as well, returning 6.41%.
The firm expects the bullish trend in utility stocks to
continue. “Fundamentals continue to look strong for both the
power and oil/gas groups,” states the letter. “We expect utility
earnings rise 10% in 2005 and to continue at this rate in 2006.”
10
Rising interest rates are not expected to impact the fundamental
outlook, “given improved balance sheets and solid cash flow.”
The minimum investment is $1 million. Fees are 1% of assets
and 20% of performance with a high-water mark. There is a oneyear lockup, after which investors can withdraw capital on a
quarterly basis. Banc of America Securities is the prime broker.
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Project2
9/21/05
3:23 PM
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AIN102405
10/20/05
6:07 PM
Page 13
October 24, 2005
The following directory includes search and hire activity for the week. The accuracy of the information, which is derived from many sources, is
deemed reliable but cannot be guaranteed. All amounts are in US$ millions unless otherwise stated. To report manager hires and new searches,
please call Nathaniel Baker at (212) 224-3648, or Robert Murray at 44 (0)207 303 1705 or fax (212) 224-3939.
Potential Searches
Total
Amt
Fund
Type
Consultant
Comments
USD31,500
Public D.B.
Private Equity (P.E.)
N/A
R.V. Kuhns & Associates,
Portland, OR
May initiate a search for a private equity manager.
Decision at Oct. 21 board meeting.
USD240
Endowment
Misc.
N/A
Fund Evaluation Group,
Cincinnati, OH
Considering search in the next 3-6 months.
Interviews with potential candidates around February.
Fresno County Employees
Retirement Association, Fresno, CA
USD2,000
USD2,000
Public D.B.
Hedge Fund Of Funds
Portable Alpha
N/A
Wurts & Associates,
Santa Monica, CA
Ongoing hedge fund-of-funds education.
Education will take 3-6 months.
Orange County Employees
Retirement System, Santa Ana, CA
USD5,500
Public D.B.
Commodities
N/A
Callan Associates,
Atlanta, GA
Considering investing in international natural
resources funds.
San Bernardino County (Calif.) Employees
Retirement Association, San Bernardino, CA
USD4,700
Public D.B.
Hedge Fund Of Funds
P.E.
USD30
USD20
New England Pension
Consultants, Cambridge, MA
May commit to the Siguler Guff’s Distressed
Opportunity Fund II. May commit to the Lehman Brothers
San Diego County Employees
Retirement Association, San Diego, CA
USD6,300
Public D.B.
P.E.
USD88
Cambridge Associates,
Boston, MA
Scouting for private equity partnerships to raise its 3.6%
private equity exposure to the target 5%.
Santa Barbara County Employees
Retirement System, Santa Barbara, CA
USD1,200
Public D.B.
Misc.
Pension Consulting Alliance,
Encino, CA
Will be providing education and potential allocation
recommendations over the next six months.
Ohio State University, Columbus, OH
USD1,700
Endowment
Misc.
N/A
None,
Will seek venture capital, buyout and p.e. managers.
Washington State Investment
Board, Olympia, WA
USD61,200
Public D.B.
P.E.
N/A
Callan Associates,
San Francisco, CA
RFP will be posted at (http://www.sib.wa.gov) on or
about Oct. 19. Proposals due Nov. 2.
USD340
Public D.B.
P.E.
USD5
Segal Advisors,
Boston, MA
RFP is available by emailing Rosemary Guillette
(rguillette@segaladvisors.com). Proposals due Nov. 9.
Idaho Endowment Fund
Investment Board, Boise, ID
USD870
Endowment
Hedge Fund
USD5
RBC Dain Rauscher,
Minneapolis, MN
Will search for a hedge fund-of-funds manager to handle
USD5 million maiden allocation once review is done.
London Borough of Lambeth .
Superannuation Fund, London, U.K
GBP544
Public D.B.
P.E,
GBP23
N/A
Hopes to appoint manager by November.
USD87,000
Public D.B.
Hedge Fund
N/A
N/A
Trustees have decided not to move into hedge funds
anytime soon.
Northumberland County Council,
Northumberland, U.K.
GBP500
Public D.B.
P.E. Fund Of Funds
GBP30
N/A
Fund has shortlisted managers. Decision expected
in December.
Orange County Employees
Retirement System, Santa Ana, CA
USD5,500
Public D.B.
P.E.
Callan Associates,
San Francisco, CA
Considering investing in international private equity.
Pensioenfonds Horen & Catering,
Zoetemeer, Netherlands
EUR1,970
Corporate D.B.
USD194,000
“
Public D.B.
“
“
“
“
“
USD145
Los Angeles City Employees Retirement
System (LACERS), Los Angeles, CA
Fund & City
Colorado Public Employees
Retirement Association, Denver, CO
Creighton University, Omaha, NE
Assignment
Mandate
Size
N/A
New Searches
Worcester County (Mass.)
Retirement System, Worcester, MA
Updated Searches
New York City Retirement
Systems, New York, NY
N/A
P.E.
Commodities
EUR100
N/A
N/A
N/A
At the final stage of selecting two managers to handle
EUR50M each. Appointments scheduled for December.
P.E.
“
USD200
USD115
Hamilton & Company,
Princeton, NJ
WL Ross & Co.
Birch Hill Equity Partners
“
“
USD25
“
ICV Capital Partners
“
“
USD50
“
Pinnacle Asset Management
Public D.B.
Absolute Return
USD5
Wainwright Investment
Counsel, Boston, MA
Massachusetts Pension Reserve Investment Trust
USD8,400
Public D.B.
P.E.
N/A
Hamilton Lane Advisors,
Bala Cynwyd, PA
Sterling Capital Management
San Bernardino County (Calif.) Employees
Retirement Association, San Bernardino, CA
USD4,700
“
“
Public D.B.
“
“
P.E.
“
“
USD25
USD25
USD25
New England Pension
Consultants, Cambridge, MA
Fillmore Capital Partners BlackRock Financial
Management.
Starwood Capital Group
San Diego County Employees
Retirement Association, San Diego, CA
USD6,300
Public D.B.
Commodities
USD300
Rocaton Investment
Advisors, Darien, CT
AIG Global Investment Group
San Francisco City & County Employees
Retirement System, San Francisco, CA
USD12,800
Public D.B.
P.E.
USD15
Portfolio Advisors,
Darien, CT
Oaktree Capital Management
Wal-Mart Stores, Bentonville, AR
USD1,500
Corporate D.C.
P.E.
USD25
Unknown
Aldus Equity Partners
Completed Searches
California Public Employees Retirement
System (CalPERS), Sacramento, CA
Haverhill Retirement System,
Haverhill, MA
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.
13
AIN102405
10/20/05
6:57 PM
Page 14
October 24, 2005
be the first time structured products will be linked to a fund of
funds invested entirely in early-stage managers because “there’s
been too much risk before,” he added. In this case, operational
risk is reduced because HFR will control all assets via managed
accounts, he explained, adding that other banking partners
might also offer structures linked to the fund.
Investors can also allocate directly into the managed accounts
and Godden expects the fund to appeal mainly to institutional
investors. The minimum investment is $1 million, but some
structured products could have smaller minimums. Fee structure
was not believed to be finalized by press time. —Robert Murray
HFR READIES
(continued from page 1)
outperform the wider hedge fund universe by 500-600 basis
points per year.
A recent study of the HFR hedge fund platform showed that
managers who have been trading for less than two years generally
outperform the wider group, Godden noted. This may be
because new managers have more incentive to outperform
because they need to attract assets, he reasoned. A small manager
can’t afford to live on management fees alone, so good returns are
vital to receive performance fees. As a fund grows, this becomes
less important since the amount earned from management fees
increases, he added. Smaller funds can also focus on their very
best investment ideas, whereas a larger fund is likely to contain
more positions, he said.
One fund of funds official said HFR’s plan, and its $25
million average allocation, are ambitious. But “some [smaller]
new managers wouldn’t—or shouldn’t—take that much from
one investor,” he stated. Godden countered that some managers
will have more capacity than others. “We’re still assessing them as
small businesses; they’ve got to be operationally sound,” he
added.
Barclays Capital will offer its clients access to the HFR fund
via structured products, continued Godden. This is believed to
DKR LIQUIDATING
Fund Index, for example, has fixed-income arbitrage—the
strategy that contains structured credit—returning 49 basis
points this year. Still, one investor said news of the liquidation
came as a surprise. “It’s not great performance but I don’t think it
was so bad they had to shut it down,” he said. “The fund has
only been trading a couple of months. I think there was plenty of
time to turn it around.”
One analyst noted that although the strategy has been down
most of the year, it is making a rebound. “If the fund is down 78%, it should be closed. Relatively speaking, they’re not doing
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B4001001
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-billion
dollar hedge fund firm
Millennium International
Management found they
were stuck. That’s because
following a guilty plea by
a
former senior trader at the
Millennium International
Fund, the fund’s redemption
limits were reached,
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
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The University of Texas System’s
$11.5 billion endowment
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
a 25% allocation, said Bob
is to have
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 MARKS
Farallon Capital Managemen
t, 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.iialtern
atives.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
spring
that allow hedge fund managers
even when their funds are
to earn performance fees
under water. Farallon wants
the ability to earn a reduced
KLM TO WEIGH FUNDS
OF FUNDS
The €8 billion KLM Pensioenfon
ds, 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
hedge funds of funds at a
to
board meeting in April.
Check www.iialternatives.
com during the week for
breaking news and updates.
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AIN102405
10/20/05
6:07 PM
Page 15
October 24, 2005
well at all and I’m sure it’s not helping them increase assets.” One
structured credit hedge fund manager added that if DKR
management can’t increase the fund’s assets, it is going to have a
hard time competing in the space.
—Jennifer McCandless
ANOTHER GOLDMAN
• FRA, 4th Annual Fund of Funds Forum, Nov. 14-16, The
New York Helmsley Hotel, New York
• TWST, Hedge Fund Due Diligence Conference, Nov. 14,
The Harvard Club, New York
• FRA, Hedge Fund Structured Products, Nov. 17-18, The
Flatotel, New York
and before that the managing director and principal of the Water
Street Corporate Recovery Fund, Goldman’s first distressed debt
investment fund.
Joining Bu are Ross Cohen and Jeffrey Weiner as head of
trading and CFO, respectively. Weiner comes from Indus, a
Japanese hedge fund and Cohen was senior global equity trader
at Federated Global Research.
Fees and lockups vary by share class but are mainly in the 2
and 20 range. Goldman and UBS will serve as prime brokers.
The latter is currently providing Akana office space.
—Nathaniel Baker
ENRON VET
subsequently took over the unit, but after a little over a year it
wanted to exit the Nordic market. Lien led a management
buyout and then management sold the unit to Pareto in May.
The strategy, which so far has consisted solely of proprietary
capital, was up 2.59% in September. Pareto trades electricity on
Nord Pool, a multi-national exchange for trading electric power
in the Nordic region. The Nordic market is unique among power
strategies because it is hydro electric, which is driven by weatherrelated pricing, said Lien. Additional funds that will necessitate
the hiring of additional managers, are possible. One such
possibility would be a European or Nordic carbon dioxide
trading fund that would launch next year, he added.
For the maiden commodities play, Pareto is seeking to raise
$150-200 million and plans to start taking in outside money in
November or December, said Lien. It is seeking a broad investor
base, but initially will target funds of funds and large institutions.
The fund will carry a EUR500,000 investment minimum with a
2% management fee and a 20% performance fee.
—Mark Faro
Calendar
• IIR, Hedge Funds Regulation & Compliance, Oct. 24-25,
Beekman Tower Hotel, New York
• FRA, Real Return Summit, Nov. 6-8, The Pointe South
Mountain, Phoenix
• SRI, Distressed Debt Investing Forum, Nov. 7-8, The
Venetian Resort Hotel Casino, Las Vegas
• Academy & Finance, Asian Hedge Funds 2005, Nov. 9, RitzCarlton Central Park, New York
Quote Of The Week
“Investors like that expression of confidence. They like to save on fees
because they’re an issue for the market.”—Larry Jones, senior
investment manager at Attica Alternative Investments, on his
fund’s unique fee structure, which features a 20% performance fee with
no management levy (see story, page 8).
One Year Ago In Alternative Investment News
Shortly after being slapped with a lawsuit by his business partner,
Paul Touradji of tiger cub Catequil Asset Management, was
fighting back. The feud between Touradji and Robert Ellis became
public when the latter filed a complaint in the Court of Chancery
of The State of Delaware where he essentially accused Touradji of
looting the firm. [The mudslinging continued when Touradji
charged Ellis with making trades with brokerage firms that had no
material benefit to Catequil (iialternatives.com, 11/19). The duo
eventually liquidated the Catequil funds and moved on to their
own separate ventures. Touradji is more energy-focused, while Ellis
has traditionally been focused on grain trading.]
The Long & The Short Of It
Going Short: Edward Jung, founder
and manager of Strategic Income
Fund, will have nine years to think
about why it is wrong to defraud
investors. According to an indictment
by the Securities and Exchange
Commission, Jung was sentenced to 109
months in prison and ordered to pay $21
million in restitution for defrauding investors in his hedge fund.
The SEC complaint states that Jung, also a controlling general
partner of ETJ Partners, a broker-dealer through which he
traded stock options on the Chicago Board Options Exchange,
falsely represented his trading performance to prospective
investors. After receiving capital, Jung misappropriated
investors’ assets to collateralize his own trading activities and to
pay for ETJ Partners’ expenses. The indictment charged that
Jung’s fraudulent activities caused 55 investors to lose more than
$21 million. AIN is going short on Jung, who is not believed to
be related to the famous Swiss psychologist, but who will have
plenty of time to ponder the workings of his soul.
15
PFPC-423 Zero Risk Tolerance Ad
9/22/04
12:07 PM
Page 1
Zero risk
tolerance?
[ All fund accounting is not created equal.
To minimize risk you need special expertise.]
There are more reasons than ever to be concerned about risk. More regulations and
market volatility. Greater tax exposure. Increasingly complex securities transactions.
And new business resiliency challenges. That’s why you need PFPC, the fund accounting
and custody provider with a 30-year track record for mitigating risk. Our internal control
structure offers state-of-the-art compliance monitoring, disaster recovery and tax
planning tools. Our dedicated teams handle your business from start to finish, with
straight-through processing solutions that minimize handoffs. And our open-architecture
technology features built-in controls that manage risk. To learn about all the ways PFPC
can help you minimize operational risk, call Bill Salus, head of global business development,
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