Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Reuters – Hedge funds will soon play a bigger role in portfolios, but investors still worry about getting their money back and understanding what a manager is doing, according to a new survey released on Monday.
Nearly 60 percent of all financial advisers who help wealthy people invest their money and institutional investors said they expect hedge funds to be as important to much more important as traditional investments over the next five years.
Bloomberg – Lucidus Capital Partners LLP, a new joint-venture of hedge fund manager Bruce Kovner’s Caxton Associates LLC, has raised about $500 million for a high-yield debt hedge fund, three people familiar with the situation said.
Darryl Green, chief executive officer of Caxton Europe Asset Management in London, will co-manage the fund with Geoffrey Sherry, a Caxton portfolio manager based in New York, said the people, who declined to be identified because the information is private. The pair will continue to run a $1 billion high-yield bond fund for Caxton, the people said.
Caxton will have a 25 percent stake in the new firm with the balance held by Green, Sherry and other staff members, the people said. The fund will use Caxton’s infrastructure and controls to help attract institutional investors reluctant to put money into a startup fund firm.
New York (HedgeCo.net) – Ms. Sandra A. Urie has been appointed to the board of 100 Women In Hedge Funds, further augmenting the organization’s network. Ms. Urie is the President and Chief Executive Officer of Cambridge Associates LLC, a global provider of independent investment advice and research to institutional investors and private clients.
Ms. Urie has held various positions at Cambridge Associates since 1985 and, before assuming the role as CEO, she served as the Chief Operating Officer and was responsible for directing the firm’s consulting practice. She is a member and vice-chair of the Investors’ Committee of the President’s Working Group on Financial Markets, which has worked to develop detailed guidelines that would define “best practices” for investors in private pools of capital in order to enhance investor protection and systemic risk safeguards. She currently serves on the Board of Advisors for the Yale School of Management, the Board of Overseers of the DeCordova Museum, and the Board of Visitors of the New England Baptist Hospital. In addition, she sits on the boards of The Plymouth Rock Company and Homesite Group Incorporated. She formerly served on the boards of Phillips Academy, Belmont Day School and Buckingham, Browne & Nichols School.
Before joining Cambridge Associates, Ms. Urie worked as a member of the faculty at Phillips Academy (Andover), where she taught Russian and served on the Admissions Office staff. She also served in the Phillips Academy development office where she was responsible for capital fund raising, and eventually she assumed the position of Associate Secretary of the Academy with responsibility for the school’s annual giving and alumni programs.
Anne Popkin, Chair of the Board of 100 Women in Hedge Funds and Principal, BlueCrest Capital, said, “We are pleased to welcome such a well-respected industry leader to our Board. We believe Sandra’s investment advisory experience coupled with her involvement in initiatives such as the President’s Working Group help us continue to represent, strengthen, and expand our investor member base.”
Ms. Urie said, “I look forward to working with the Board to strengthen 100 Women in Hedge Funds’ initiatives on member education, professional development, and philanthropy.”
Ms. Urie graduated from Stanford University and received a Master of Public and Private Management graduate degree from the Yale School of Organization and Management. Additionally, she holds the Chartered Financial Analyst designation.
Reuters – Institutional investors said on Thursday that draft European Union rules that could bar non-EU fund managers from marketing their products in the region could limit their investment choices and upset their portfolio balance.
U.S. managers “would effectively be excluded from the EU market,” a senior fellow at the U.S. Securities and Exchange Commission asserted at a conference hosted by the Financial Services Authority.
“Choice is the biggest single area of concern for us,” said Jeremy Hill, general counsel for the Universities Superannuation Scheme (USS), which runs 24 billion pounds in assets.
Wall Street Journal Blogs – Are hedge-fund managers making a comeback with investors? The great recession hammered the hedge-fund industry in 2008. Returns tumbled, redemptions soared and investors began questioning the very underpinnings of the industry. Active managers promise to beat, rather than match, the market’s overall returns and charge fees that can be at least 10 times higher than those of index funds.
The WSJ reported in June that an increasing number of big investors are concluding that stock and bond pickers failed to add any value in the market turmoil and are shifting to index funds. A survey by Greenwich Associates at the time found that about one in five institutional investors said they recently had shifted money away from active managers and into passive index strategies. That was up from just 4% who expected to make that shift when asked from July to October 2008.
HedgeCo.net (West Palm Beach) – The Alternative Investment Management Association, (AIMA) has launched a Directive Centre on their website as part of an on-going campaign to have the European Commission’s draft directive on Alternative Investment Fund Managers revised.
It is intended as a resource for journalists and members of the public and contains everything relevant for our campaign, including press releases, guidance notes, FAQs and other resource materials issued by AIMA; speeches and articles on the directive and links to relevant documents, including the European Commission’s directive and details of its legislative process; and a quotations section featuring a host of different figures expressing their concern about the directive.
Those quoted expressing concern or reported as doing so include pension funds and pension fund industry groups, European institutional investors, global banks, international law firms, commercial real estate groups, private equity, Swedish and UK ministers, Irish officials, the chair of the European Parliament’s ECON committee, the US Treasury, the UK Conservative party, the Mayor of London, the German Funds association, the Financial Times and the Economist, and even Robert Peston, Jacques de Larosiere and Charles McCreevy.
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HedgeCo.net (West Palm Beach) – Hedge fund manager Headline Capital Management LLC, is spearheading a series of capital introduction events showcasing the largest gathering of hedge fund managers from the Charlotte region. Aegis Funds Management, Afton Capital Management, Blackhawk Capital Management, Charlotte Global Advisors, Gorelick Brothers Capital, Keane Capital Management plus other hedge funds in the Charlotte region are also participating.
As the nation’s second largest banking center, Charlotte is also an attractive haven for hedge funds. Some of the nation’s most talented investment professionals relocated here to work for Bank of America and Wachovia, now a wholly-owned subsidiary and east coast headquarters for Wells Fargo. Many of these former bankers and traders stayed here to start their own hedge funds, especially after merger-related layoffs.
What is truly unique about the Charlotte Hedge Fund Forum is that in a highly competitive market, 7+ hedge fund managers from the same city have the foresight to jointly promoting a series of capital introduction events. “We’re still competitors. By working together, however, we can leverage our marketing dollars to attract more investors than we could alone,” says Mark McClanahan, the marketing director at Headline Capital Management.
The Charlotte Hedge Fund Forum provides more value than the traditional cap intro event by showcasing several hedge fund managers from the same city. The Charlotte showcase is more efficient for institutional investors with tight travel budgets who want to meet several managers at the same time. Wealthy families and high net worth individuals who are more comfortable investing in managers located closer to home, especially in this post-Madoff era, will also benefit from this Charlotte showcase. The real payoff is after the event when the investor needs to visit each hedge fund’s office for due diligence. Investors who attend the Charlotte Hedge Fund Forum will save time and money following up with several Charlotte-based managers during one trip.
The Charlotte Hedge Fund Forum is scheduled for September 23, 2009 at the historic Duke Mansion where tobacco baron James B. Duke founded The Duke Endowment. Mark Yusko, President and CIO of Morgan Creek Capital of Chapel Hill, North Carolina will deliver the Keynote Speech on “Alternative Thinking for Investments” during a complimentary luncheon. Afterwards, each hedge fund manager will deliver a formal 10-12 minute podium presentation and then meet with investors during a series of 30-minute, informal “meet the manager” roundtable discussions.
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HedgeCo.net (West Palm Beach) – Hedge fund manager Bandon Capital Management, LLC, has made it’s flagship investment strategy, DIRS – Directional Interest Rate Strategy – available to investment advisors through Adhesion’s WealthADV UMA platform.
The flagship strategy, celebrating it’s 5th year anniversary at the end of this month, seeks to provide investors with absolute returns, uncorrelated with the equity and fixed income markets by investing in the US Treasury Market using ETF’s or mutual funds and is available to non-accredited investors.
Bandon is focused on delivering the attractive investment characteristics of alternative investing – absolute returns with low correlations – to the mass affluent and small institutional investors while minimizing or eliminating many of the structural negatives including high minimums, high fees, long lock ups and lack of liquidity and transparency.
”Every day we hear from advisors sharing the frustration of their clients, whose account balances have been decimated and are not yet reflecting the economic recovery they keep hearing about.” Bill Woodruff, Founder and Managing Principal, said, ”Increasingly, advisors are recognizing the benefit of allocating a portion of their portfolio to absolute return strategies – just like large institutional and ultra HNW investors – and are knocking on our door. We could not be more pleased with the opportunity to be included on the Adhesion platform which has many benefits including an open custody approach that enables advisors and their clients to access Bandon’s strategies through Schwab Institutional, Fidelity, TD Ameritrade and Pershing”.
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HedgeCo.net (New York) – "Attitudes towards hedge fund risk are poised to change," Sara Grillo, Founder of the Coalition for Safer Hedge Funds said in a paper examining proposed improvements in risk measurement, "The evolution will have positive results for the industry."
The paper also analyses the consequences of risk on portfolio performance, the report predicts that regulatory scrutiny will be the catalyst that forces risk levels down and ultimately drives the industry toward a period of maturity. Within this more stable environment, inflows from retail and institutional investors will surge, leading to the emergence of hedge funds as a more popular investment choice amongst the investing public.
Many academics believe that hedge fund returns are not predictable, and that the only persistent factor in performance history is risk itself. Research conducted by Martin Herzberg and Maim Mozes articulates the notion that less risky funds persistently are more likely to outperform riskier ones in the long term. Riskier managers are likely to take large directional “bets” which may crash when the market trends reverse. Less risky funds base decisions on fundamental skill and are less correlated with markets.
The role of high risk funds, Herzberg and Mozes believe, should be to diversify a portfolio rather than act as the main source of return. Aside from investment style, Herzberg and Mozes cite the other factors that affect returns such as the fund size, growth in assets under management, and length of investment history. They note that funds with shorter track records tend to exhibit higher returns than ones with longer track records. They identify the reasons to be their more experimental style, lack of controls, lack of auditing, and self-selection. Herzberg and Mozes hypothesise that funds with lower levels of assets under management tend to outperform, but this tendency fades as assets increase. Additional assets are placed in cash or must be placed with secondary managers, dragging down alpha.
The show is not over yet, she says. In fact, it is just beginning. As attitudes towards risk evolve, there is still plenty more room for the industry to grow. Although industry scandals have left investors reeling, scepticism will fade as industry regulation will increase transparency.
Increased scrutiny by industry watchdogs will lead to the normalisation of risk and return, which will ultimately decrease the level of hedge fund volatility. As volatility levels normalise, hedge funds will become more popular with retail investors and pension funds.
This surge in demand will propel the industry through its lifecycle until it reaches its ultimate maturation level. Regulatory developments and their effect on risk will be the catalyst that leads to the emergence of hedge funds as a prominent investment option amongst the investing public at large.
Sara Grillo earned her B.A. from Harvard University with honors. She is currently enrolled in a M.B.A program at the New York University Stern School of Business. She passed the CFA Level One examination in June 2003, and is a affiliate member of the New York Society of Securities Analysts and the CFA Institute.
Alibaba News Channel – European companies emerging from the credit crisis should start looking over their shoulders: activist investors are set to return from hibernation, working more closely than ever with institutions to effect change.
The activists, who favour methods such as changing balance sheet structures, ousting chairmen or selling off non-core units, had little to do during the crisis when buyers were scarce and there was little appetite for transformatory change. But now they are set to gain from a political will to drive large institutional investors towards more active investment and away from a mentality of simply selling stocks they don’t like, while a purge of more leveraged, short-termist funds has cleared the ground for activists to tap a wealth of new opportunities.
"Pushed and shoved by the regulators, mainstream institutions are beginning to countenance interaction with activist investors," said a senior figure at one activist firm.
HedgeCo.net (West Palm Beach) – Hedge fund manager OakRun Capital announced the appointment of Mark Potter and Brian Long, both experienced Asia investment executives. The expansion is to build strategic relationships with local institutional investors and provide access to its hedge funds and investment products, including the new OakRun Short Term Income Fund.
Potter, an experienced investment executive based in Singapore, joins the firm as Director of Asia Institutional Marketing and Distribution. Long, a senior level investment professional based in Singapore, has been named Director of Asia Institutional Relations.
The OakRun Short Term Income Fund charges a 1% management fee and a 10% incentive fee with a $1MM minimum investment requirement, it returned 0.73% (9.26% Annual Yield) for June 2009 and paid out its third quarterly dividend.
“Asia is a natural market for OakRun Capital," Potter explained, "Together, the team has extensive experience in the region, speaks several local languages and has built very strong personal and institutional relationships."
"The flagship Short-Term Income Fund has received incredible initial feedback from institutions. There are very few products or funds, if any, like the OakRun Short Term Income fund that can provide investors with high credit quality, superior performance, and stable income distributions. The fund is invested in highly liquid instruments with substantially higher yields than comparable investments with duration of less than 45 days,” Portfolio Manager, Arturo Neto, CFA, said.
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This is Money – Institutional investors are still running scared from hedge funds after last year’s bloodbath, figures from sector giant Man Group show.
They pulled a net £2bn from Man Group in the first quarter of its financial year. Confidence in hedge funds has been rocked by their poor performance of late.
Keith Baird, analyst at Oriel Securities, said 2008 destroyed the entire theory of hedge funds ability to produce positive returns in any market. He said: ‘The illusion was shattered.’
