KKR TO LAUNCH HEDGE FUND HEDGE FUNDS PILED INTO

AIN022706
2/23/06
7:31 PM
Page 1
KKR TO LAUNCH HEDGE FUND
FEBRUARY 27, 2006
VOL. VII, NO. 8
Tommy Taylor,
1942 - 2006
Tommy Taylor died at
age 63 in a
snowmobile accident
Tommy Taylor
in upstate New York.
See story, page 4
At Press Time
Third Point Duo Departs
Citi Bulks Up Marketing
2
2
Private equity giant Kohlberg Kravis Roberts will launch its first hedge
fund, KKR Strategic Capital Fund, at the end of the second
quarter. According to a potential investor, the fund will focus
on buying bonds and loans in the secondary market and will
also provide direct lending. It is expected to launch with
$1 billion. A KKR spokeswoman declined to comment.
Nino Fanlo and David Netjes will manage the fund along
with new staff the firm is seen hiring.
Many hedge funds have private equity investments as part of
their portfolios, including Eric Mindich’s Eton Park Capital
Management and Alec Litowitz’s Magnetar Capital. KKR,
(continued on page 11)
Beyond PXRE
U.S. News
Outflows In Most MSCI Sectors
San Diego Firm Rolls Out First FoF
4
6
European News
Stenham To Unveil Multi-Strat Play
RAB To Close Table-Topping Fund
6
7
Under the Hood
Big Apple Firm Cashes Out
Long Position
London Firm Profits On
Mortgage Lender
8
8
News From Other Ports
Toronto Firm Rolls Out Trusts Fund
8
Departments
Search and Hire Directory
Data Zone
9
9
COPYRIGHT NOTICE: No part of this publication may
be copied, photocopied or duplicated in any form or by
any means without Institutional Investor’s prior written
consent. Copying of this publication is in violation of the
Federal Copyright Law (17 USC 101 et seq.). Violators
may be subject to criminal penalties as well as liability
for substantial monetary damages, including statutory
damages up to $100,000 per infringement, costs and
attorney’s fees. Copyright 2006 Institutional Investor,
Inc. All rights reserved. ISSN# 1544-7596
For information regarding subscription rates
and electronic licenses, please contact Dan Lalor at
(212) 224-3045.
HEDGE FUNDS PILED INTO REINSURANCE COS
AFTER HURRICANES
Bermuda-based PXRE Group, whose stock price imploded last week, is not the only
reinsurance company with major hedge fund shareholders. Some of the biggest hedge funds
have substantial stakes in PXRE competitor companies, according to Securities and
Exchange Commission filings that reflect holdings through Dec. 31, the last day of last
quarter. Most of these trades probably took place after last fall’s hurricane season, because of a
perceived opportunity for reinsurance companies, explained a hedge fund manager whose
firm is not invested in the sector.
Farallon Capital Management, the world’s biggest hedge fund, is also the largest
shareholder in Bermuda-based insurance and reinsurance company Arch Capital Group. The
(continued on page 10)
EX-SOROS MANAGER READIES MACRO FUND
Colm O’Shea, formerly senior macro portfolio manager for Soros Fund Management’s
famed Quantum Fund, will launch a global macro fund. O’Shea and his team have been
managing the strategy for Chicago-based Balyasny Asset Management (BAM) since
December, 2004 and are now planning to roll out a stand-alone vehicle under a joint
venture. O’Shea, reached at his London office, declined to comment.
The COMAC Global Macro Fund is slated for May, according to a Lehman Brothers
prime brokerage document. The team will continue to manage its $240 million portfolio for
BAM, which is up 16.6% since inception through the end of January. The fund will invest in
fixed income, foreign exchange, equities and commodities. It will have a $1 million/€1
million investment minimum with fees set at 2/20.
Besides O’Shea, the team includes Portfolio Manager Walter Schabel, who set up the U.S.
(continued on page 11)
Check www.iialternatives.com during the week for breaking news and updates.
AIN022706
2/23/06
7:32 PM
Page 2
Alternative Investment News
www.iialternatives.com
February 27, 2006
At Press Time
Loeb Loses Two Partners
EDITORIAL
Jeff Hires and Jonathan Urfrig, partners at Dan Loeb’s Third
Point Management Company have departed the firm. Hires
went to DB Zwirn & Co. It could not be determined where Urfrig was headed.
Neither was unavailable for comment. Calls to Third Point were not returned by
press time.
TOM LAMONT
Editor
STEVE MURRAY
Deputy Editor
DOUGLAS CUBBERLEY
Executive Editor
(212) 224-3318
NATHANIEL E. BAKER
Managing Editor
(212) 224-3648
Ariz. Retirement System To Discuss Alts
MARK FARO
Senior Reporter
(973) 706-5307
The $23 billion Arizona State Retirement System plans to discuss investing in
private equity and hedge funds during an asset allocation study to begin sometime in
the next three to four months. The plan doesn’t yet invest in either asset class. CIO
Gary Dokes said he is open to considering both private equity and hedge funds, but
isn’t sure what direction the fund will take. He said he is mindful of the large fees that
come with investing in alternatives. The fund, which is advised by Mercer
Investment Consulting, conducts asset studies approximately once every three years.
ROBERT MURRAY
Senior Reporter
(44-20) 7303-1705
ELANA MARGULIES
Associate Reporter
(212) 224-3615
ELINOR COMLAY
(44-20) 7303-1738,
VENILIA BATISTA
(44-20) 7303-1718
London Bureau Chiefs
Citi Adds To Marketing Team
Citigroup Alternative Investments, which manages roughly $37 billion, has
made another addition to its marketing team. Ari Barkan has come on board as
head of North American public sector sales, according to an internal memo. He
will sell the firm’s hedge fund, private equity, real estate, structured product and
managed product investments.
Barkan was the head of North America for the Public Sector Group in the
corporate and investment banking division at Citi. His addition comes on the
heels of CAI snagging Amy Lesch from Deutsche Asset Management to be head
of consultant relations (AIN, 2/6). The firm also recently added Maureen Garrity
from Thunder Bay Capital Management to market its products to U.S.
corporate pension plans. Barkan was unavailable for comment at press time.
STANLEY WILSON
Washington Bureau Chief
(202) 393-0728
MATTHEW TREMBLAY
Hong Kong Bureau Chief
(852) 2912-8097
JANA BRENNING, KIERON BLACK
Sketch Artists
PRODUCTION
DANY PEÑA
Director
LYNETTE STOCK, DEBORAH ZAKEN
Managers
MICHELLE TOM, ILIJA MILADINOV,
MELISSA ENSMINGER,
BRIAN STONE, JAMES BAMBARA
Associates
JENNY LO
Web Production & Design Manager
MARIA JODICE
Advertising Production Manager
(212) 224-3267
Hedge Fund Still Hopes For MTR Buyer
The hedge fund that pushed for MTR Gaming Group to reject a $258 million
takeover bid from two senior executives is still hoping for another suitor after
MTR’s board recently rejected the executives’ offer. “We’re extremely happy that
the special committee rejected the bid, regardless of whether there’s a better bid
on the immediate horizon,” said David Goolgasian, portfolio manager at DDJ
Capital Management, whose October Fund owns 4% of the company’s shares
(AIN, 12/15). “We still think it’s an extremely cheap asset.”
MTR shares currently trade just under 10. The executives offered 9.50 per
share. Goolgasian argued it’s undervalued as the share price values MTR as 7X its
enterprise value to EBITDA. The industry standard is 8X and higher, he said.
ADVERTISING
JONATHAN WRIGHT
Advertising Director
(212) 224-3566
[email protected]
PAT BERTUCCI, ADRIENNE BILLS,
PHILIP COX, MAGGIE DIAZ
Associate Publishers
Tell Us What You Think!
Questions? Comments? Criticisms? Do you have something to say about a story that appeared in AIN? Or
is there information you’d like to see published? Whether you’re irate with your boss, would like to
discuss a new business strategy or crow about a big hire, give us a call. Managing Editor Nathaniel
Baker can be reached at 212-224-3648 or [email protected].
2
Copying prohibited without the permission of the publisher.
PUBLISHING
MARK FORTUNE
Publisher
(212) 224-3129
BRIAN McTIGUE
Senior Marketing Manager
(212) 224-3522
JAMES MERRINGTON
Asian and European Marketing
Manager [London]
(44-20) 7779-8023
VINCENT YESENOSKY
Senior Operations Manager
(212) 224-3057
DAVID SILVA
Senior Fulfillment Manager
(212) 224-3573
SUBSCRIPTIONS/
ELECTRONIC LICENSES
One year - $2,495 (in Canada add $30
postage, others outside U.S. add $75).
DAN LALOR
Director of Sales
(212) 224-3045
DAVID VAN ENGEL
Account Executive
(212) 224-3824
EMILY-JANE STAPLETON
Account Executive [London]
(44-20) 7779-8704
[email protected]
REPRINTS
DEWEY PALMIERI
Reprint & Permission Manager
(212) 224-3675
[email protected]
CORPORATE
CHRISTOPHER BROWN
Chief Executive Officer
DAVID E. ANTIN
Chief Operating Officer
ROBERT TONCHUK
Director/Central Operations & Fulfillment
Customer Service: PO Box 5016,
Brentwood, TN 37024-5016.
Tel: 1-800-715-9195. Fax: 1-615-377-0525
UK: 44 20 7779 8704
Hong Kong: 852 2842 6910
E-mail: [email protected]
Editorial Offices: 225 Park Avenue
South, New York, NY 10003.
Tel: (212) 224-3648
Email: [email protected]
Alternative Investment News is a
general circulation weekly. No statement
in this issue is to be construed as a
recommendation to buy or sell securities
or to provide investment advice.
Alternative Investment News ©2006
Institutional Investor, Inc. ISSN# 1544-7596
Copying prohibited without the
permission of the Publisher.
UBS ad
1/19/06
12:53 PM
Page 1
Announcing a new absolute return strategy
with a 25-year head start.
For 25 years, UBS Global Asset Management has been committed to a global, multi-capability approach to help
clients reach their investment objectives. Our new Dynamic Alpha Strategy extends this time-tested expertise by
drawing on our diverse investment capabilities in new ways.
Both a focus on real return and an ability to separate market and security selection exposure work to reduce your
reliance on market performance. And, with our cutting-edge risk management approach, we seek to ensure that
you are compensated for the risks you take. In all, it’s an innovative solution designed to help you achieve your
goals. Which ultimately means one thing: you can be confident when choosing Dynamic Alpha. You and us.
To learn more about the Dynamic Alpha Strategy, call Greg Fedorinchik at 312-525 7971,
or visit www.ubs.com/globalam-us
© UBS 2006. All rights reserved.
AIN022706
2/23/06
7:32 PM
Page 4
Alternative Investment News
www.iialternatives.com
February 27, 2006
U.S. News
Wine Fund Completes Independent
Advisory Board
The Dumbarton Group’s European Wine
Investment Fund has appointed an
independent advisory board. Joining
Brooks Miller’s firm are Stephen
Bachmann, founder of Vinfolio, a software
firm that helps wine investors develop and
manage their collections, Kirk Davis, ceo
Brooks Miller
at Bermuda bank Capital G, Eva JeanbartLorenzotti, managing director at Bear Stearns and Eric
Roper, senior managing partner at New York law firm
Gersten Savage.
The EWI fund will aim to generate returns by buying wines
that have the greatest future value in relation to others in their
class (AIN, 7/18). Fund partners Michel Rolland, Joel Palous
and Miller are currently raising capital and are analyzing initial
investment opportunities in Bordeaux, Tuscany and Italy’s
Piedmont region.
Tommy Taylor Dies In
Snowmobile Accident
Taylor Companies founder Tommy Taylor
died at age 63 as the result of a snowmobile
accident Sunday in upstate New York. Taylor’s
wife Linda was seriously injured in the
accident as well and remains in critical
condition, according to an investor letter.
The firm has named Barry Cronin as
Thomas Taylor
portfolio manager of Taylor Insurance Series
1942-2006
and Taylor Investment Series, its insurancededicated funds that launched in February 2004 (AIN, 1/19/05).
Kevin McDonald and Jason Taylor, co-founders of The Taylor
Companies, will continue to oversee the firm’s day-to-day
operations. “The employees of The Taylor Companies are deeply
saddened at the untimely passing of our founder…we will honor
Mr. Taylor’s memory by continuing his ground-breaking work in
alternative investing and his vision of unparalleled client service,”
reads a statement by the firm.
Prior to founding his firm, Taylor managed money for the
Bass family for more than two decades. “When Tommy
founded The Taylor Companies in 2001, his vision was to create
a trusted advisor to provide knowledgeable, experienced
guidance to clients facing an expanding array of alternative
investment options,” says the document. “We believe that
4
Tommy realized his vision, and that the success of The Taylor
Companies is a testament to his commitment…The Taylor
Companies are dedicated to continuing Tommy’s vision, and to
continuing the high level of service and performance our clients
have come to expect.”
The Associated Press reports that the accident occurred when
Taylor failed to yield the right of way to a van and that he was
pronounced dead at the scene. “Mr. Taylor was participating in a
guided snowmobile tour near Saranac Lake, when he became
separated from the group and unexpectedly came upon the road
where the accident occurred that caused his death,” says a
statement from the firm’s spokespersons.
The family requests that donations in lieu of flowers be made
to the Thomas M. Taylor Memorial Fund for Excellence in
Education, in care of Greenwich Academy, 200 N. Maple
Avenue, Greenwich, Conn. 06830. Arrangements for a
memorial service will be delayed pending the recovery of his wife,
who remains hospitalized.
Three Of Five MSCI Strategy Sectors
Report Outflows
Three out of five MSCI Hedge Fund Composite Index process
groups lost assets last quarter, despite the fact that the index
generated a positive performance return, according to the
firm’s research report. One of the three groups, relative value,
which contains the merger arbitrage, statistical arb and
convertible arb sub-sectors, had the largest negative overall
asset outflows of $10.85 billion. The two other groups that
lost assets were directional trading and multi-process, which
contain the discretionary trading, tactical allocations and
systematic trading sub-sectors and event-driven subsectors respectively.
Security selection and specialist credit were the exceptions to
the fourth quarter trend. Within these process groups, the
greatest inflows were to the long-bias sub-sector, part of the
security selection group. The groups’ other sub-sectors include
short-bias, long/short credit, distressed and private placement,
among others.
Chris Lennon, v.p. of MSCI, said despite the 2.2% fourth
quarter performance gain, negative asset flows from hedge funds
followed last year’s downward performance trend.
Specifically, asset flows continued to move out of areas of poor
performance. Convertible arb funds turned in the worst
performance over the past 12 months—a 1.79% drop—and have
also had the largest capital withdrawals of $5.34 million over the
same time period, says the document. The distressed securities
Copying prohibited without the permission of the publisher.
Project4
1/3/06
3:29 PM
Page 1
When you want to express your devotion to The Dow, nothing says it like Diamonds (DIA). Exchange traded funds
(ETFs) that give you 30 blue chips, the entire Dow Jones Industrial Average, in every single share. They’re tax efficient,
and have low management fees, too. Like stocks, Diamonds can be traded all day long, are subject to similar risks,
and, of course, your usual brokerage commission applies. Ask your advisor for details. Or forever hold your peace.
www.DowDiamonds.com. Ticker symbol Amex:DIA. The 30 blue-chip companies of The Dow in every share.
IDow.
An investor should consider investment objectives, risks, charges and expenses of the investment company carefully before investing.
To obtain a prospectus, which contains this and other information, go to www.DowDiamonds.com or call 1-800-843-2639. Please read
the prospectus carefully before investing. Dow Jones Industrial Average,SM The Dow ® and Diamonds ® are trademarks of Dow Jones &
Company, Inc., licensed for use by State Street Global Markets, LLC. Diamonds are not sponsored, endorsed, sold or promoted by Dow
Jones and Dow Jones makes no representation regarding the advisability of investing in Diamonds. ©2006 State Street Corporation
ALPS Distributors, Inc., a registered broker-dealer, is distributor for the Diamonds Trust, a unit investment trust.
DIA000101
AIN022706
2/23/06
7:32 PM
Page 6
Alternative Investment News
www.iialternatives.com
February 27, 2006
U.S. News (cont’d)
funds, however, were the best performing strategies over both a
three and five-year period ending Dec. 31.
San Diego Startup Readies FoF
Saggezza Investment Management is readying its first fund of
funds. The nascent San Diego firm is planning to roll out the
fund in June or July, said Roger Beutler, principal. It is expected
to launch with $10-15 million.
Saggezza has already identified the initial managers and the
fund will be mostly long/short, with other strategies such as
event-driven, relative value and global macro also in the mix.
Eventually the fund will be concentrated with around 15-22
managers. The firm is targeting returns of 10-15% with volatility
around 6-8%, said Beutler.
The firm is talking to prospective investors, which include
high-net-worth individuals and small institutions. Also, a South
American bank has put the fund on its recommended list for
clients and Saggezza will also make the rounds with Swiss private
banks, noted Beutler.
The fund will have a $1 million investment minimum, but
the firm will be flexible for early investors, said Beutler. The
fees will be 1/10. Beutler was at Dunham & Associates where
he was responsible for sub-adviser selection for the firm’s
mutual funds. His partner, Patrick Morrell, also hails
from Dunham.
Louisiana Firm Taps Analyst
Baton Rouge, La.-based Maple Leaf Partners has hired an
analyst. Edward Crawford has joined the firm to cover the
financial sector as well as some complementary industries,
according to an investor letter. He was a research analyst at
George Weiss Associates where he was part of a five-person
team responsible for managing $200 million. Calls to Dane
Andreeff, general partner of Maple Leaf, were not returned by
press time.
The firm’s Maple Leaf Partners fund was up 1.2% for the
fourth quarter and ended the year up 27.8%. It also recently
established a position in Seagate Technology. “Seagate’s
technology leadership and manufacturing agility coupled with
the pending acquisition of Maxtor will enable them to reap the
benefits of this next chapter in the industry’s history,” according
to the letter.
European News
Emerging Markets Shop
Readies Fund
one-stop-shop for emerging markets, said Priday. It plans to
eventually have a stable of five-six funds, but for the moment
there are no plans to launch additional vehicles.
Finisterre Capital, the London-based emerging markets
specialist, is planning to roll out its third fund, Finisterre Global
Opportunity Fund, in April. The firm has already lined up $60-65
million in commitments for the new fund, said Tom Priday,
partner in London.
Finisterre opened its doors three years ago with the launch of
its sovereign debt fund. The new fund is an offshoot, which will
appeal to investors with a higher risk appetite, such as funds of
funds, he added. The firm is projecting annual returns of around
15% with more volatility than the sovereign debt fund.
The Global Opportunity fund will invest more in local
market’s foreign exchange and interest rates. It will also take more
corporate risk as well as a small allocation to equities. To
accommodate the more corporate and special situations nature of
the investing, the firm tapped Rafaël Biosse Duplan who was
head of emerging markets for Lehman Brothers in Europe.
The fund will have a $500,000 investment minimum. Fees
for initial investors will be 1.5/20, and subsequent investors
will pay 2/20.
Finisterre has $342 million in assets. The firm’s goal is to be a
6
Stenham Plans Multi-Strat Launch #3
Stenham Advisors, with $2 billion under management, is
planning to launch a new multi-strategy fund of hedge funds
in April. It will be offered to new investors in place of the
firm’s existing two SGL Universal multi-strategy funds, which
are set to close shortly, said Harry Wulfsohn, director in
London. The new fund, which is likely to be named simply
Stenham Multi-Strategy, will have a different investment
approach to the Universal funds, but this has not yet been
finalized, he continued.
The two Universal funds hold $637 million between them.
They will close to new investors but could still accept some
allocations from existing clients, suggested Wulfsohn. The
decision to close has been taken because the firm does not want
to significantly increase the number of underlying managers in
the two funds of funds as assets grow. “You don’t want to overdiversify a portfolio; you’d dilute the returns of some of the
funds,” explained Wulfsohn.
Copying prohibited without the permission of the publisher.
AIN022706
2/23/06
7:49 PM
Page 7
February 27, 2006
www.iialternatives.com
Alternative Investment News
GMP Doubles Assets On
Strong Performance
RAB To Close Special
Situations Fund
London-based GMP Asset Management, which is run by
well-known event-driven manager Guillaume
Molhant Proost, has roughly doubled its assets
under management since the start of the year
on the back of strong performance.
The firm launched its European eventdriven fund in March 2004 and it held $100
million at the end of 2005, said Eoin
Brophy, spokesman for the firm. The fund
returned 18.52% last year and this has led
investors, including funds of funds and private banks, to allocate
an additional $100 million in the past few weeks, he said. The
fund is up 26% since inception.
Prior to founding GMP, Molhant Proost was head of eventdriven strategies at Paris-based Credit Lyonnais Asset
Management subsidiary Systeia Capital Management. The
fund has a capacity of $500 million, “so there’s still substantial
room for growth,” observed Brophy, who added that GMP is
anticipating additional inflows in the next few months. There
are no immediate plans to soft-close the fund.
RAB Capital’s $900 million special situations fund is likely to
close to new investors next month, said Michael AlenBuckley, co-founder and chairman. This could take place as
soon as the $1 billion threshold is reached,
he added.
The fund, 15% of which is invested in
early stage private equity deals, returned
nearly 30% last year and over 120% since
its July 2003 launch. This year, it is at or
near the top of all third-party performance
Michael Alen-Buckley
tables, with a 14.69% return through Feb.
9. Strong returns in energy and mining sectors have been
partly responsible for the fund’s strong performance this year,
said Alen-Buckley. The gold rally has also provided a boost,
he added. “We’re not committed to staying there indefinitely
but that is where the value is at the moment,” Alen-Buckley
said of the fund’s current allocations. The fund turns over
roughly half its portfolio each year and is mulling
investments in the debt/finance area of mining, possibly at
year-end, he noted.
3ILVERSPONSORS
n!PRIL3HERATON3TOCKHOLM
(OTEL4OWERS3TOCKHOLM3WEDEN
"RONZESPONSOR
9OURGATEWAYTOTHEREGIONTHATOUTPERFORMSTHERESTOF%UROPE
7ORKSHOPSPONSOR
s $ISCOVERHOWTHERECENTANDIMPENDINGLEGISLATIONSAREAFFECTINGTHE.ORDICHEDGEFUNDMARKET
s (EARFROMSTARMANAGERSOFTHE.ORDICMARKETANDLEARNHOWTHEYOUTPERFORMEDTHERESTOF%UROPE
s -EETTHEINVESTORSGLOBALLYRENOWNEDFORTHEIRHIGHALLOCATIONTOHEDGEFUNDS
/RGANISEDBY
"//+./7BYCALLINGTEL
ORBOOKONLINEATWWWHEDGEFUNDSWORLDCOMSCANDI
AIN022706
2/23/06
7:32 PM
Page 8
Alternative Investment News
www.iialternatives.com
February 27, 2006
News From Other Ports
Toronto Firm Launches
Trusts Fund
Toronto-based Leeward Hedge Funds has launched
a long/short fund focused on incomeproducing Canadian trusts. The Caymandomiciled Leeward Offshore Canadian Income
Fund goes long and short on trusts in sectors
such as oil and gas royalties, real estate and
infrastructure, according to an investor
document. The short mandate is open to all
securities, not just income trusts, the
document adds.
Brendan Kyne, cio, said the offering is the only one
available globally for non-taxable investors dedicated to the
Canadian high-yield income trust market. “The fund pays
investors a semi-annual distribution related to income the fund
receives from the income trust it invests in,” he said. “Investors
like it because it is very tax efficient.” Kyne added
that he did not want to compromise the targeted
yield of 8-10% by applying a performance fee.
Prior to founding his firm in 2001, Kyne
worked as a portfolio manager at Chicago’s
Driehaus Capital Management. Kyne is one of
16 people at Leeward.
The fund’s monthly compound rate of return
is 8.11% and cumulative return since inception is
26.73%. The prime broker is Royal Bank of
Canada. The fund requires a $100,000 investment
minimum. The management fee is 1.5%.
Under The Hood: AIN’s look inside hedge fund strategies
Okumus Gains On
Cisco Value Play
Okumus Capital, a $750 million hedge fund firm in New
York, last month cashed out of a profitable long position in
Cisco Systems. The firm accumulated the position toward the
end of last year when incorrect negative perception of lower
revenues growth brought the company’s stock price down, said
Ahmet Okumus, president. “Cisco had been experiencing
decelerating revenue growth rates over the past four quarters
from a high of 18% in Q1 ‘05 to 9% in Q1 ‘06,” he explained.
The stock sold off to a low of 16.83 in Q2 ‘05 after Wall Street
analysts cautioned it wouldn’t be able to make the 10-12%
expected revenue growth rate. The firm accumulated the stock
at an average price of 17.50, Okumus added.
Cisco looked undervalued in part because its product
bookings growth remained at consistently high levels—13-15%,
said Okumus. “We believe [product bookings growth] provides
a better indication of the overall strength of the business,” he
explained. “With a free cash flow yield of approximately 8% and
a large share buyback we saw very little downside to the stock.”
Additionally, the company boasts a very strong management
team and is a dominant player in the field, Okumus added.
Okumus sold the stock last month after a stock rally in 2006.
At press time, Cisco was trading at 19.49, a gain of nearly 14%
since its year-end close price of 17.12.
The firm has three long/short funds; Okumus Opportunity
Fund, Okumus Diversified Value Fund and Okumus Technology
Value Fund, each of which has two separate share classes.
8
Management fees are 1% for Class 1 and 2% for Class 2 funds
with performance fees of 20 or 25% depending on the fund. The
investment minimum is $1 million for each fund. The prime
broker is Bear Stearns.
U.K. Fund Profits From
Mortgage Lender
London-based Progressive Alternative
Investments has profited by selling 25% of its
holding in Kensington Group, a U.K.
specialist residential mortgage lender.
Progressive’s U.K. mid- and small-cap
long/short equity fund, Stockbridge Fund, first
bought Kensington at 529p in May 2005,
Ian Lancaster
and then doubled its position in June at
575p. This was the largest position held by the fund, at 5%, said
Ian Lancaster, fund manager. The firm sold one quarter of its
holding late last month, at just over 1100p. The decision to sell
was valuation-driven. “Sometimes it’s best to sell at the
maximum point of euphoria,” he added.
The firm has reinvested the money in two stocks: AGA, the
oven manufacturer, which has a growing sales flow in the
U.S., and Cattles, a sub-prime lender. The latter is a stock
that has been held by Stockbridge in the past: “we switch it on
and off,” acknowledged Lancaster. Both new positions
represent 3% of the fund, which is “the average kick-off
position size,” he said. Stockbridge was up 5.1% in January. It
made 15% in 2005.
Copying prohibited without the permission of the publisher.
AIN022706
2/23/06
7:32 PM
Page 9
February 27, 2006
www.iialternatives.com
Alternative Investment News
Search & Hire Directory
Powered by:
i i s e a r c h e s . c o m
The following directory includes search and hire activity for the week. The accuracy of the information, which is derived from many sources, is
deemed reliable but cannot be guaranteed. All amounts are in US$ 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
Fund & City
Employees Provident Fund, Sarawak, Malaysia
Medical Research Council Pension Scheme, London, U.K.
Yorkshire Building Society Pension Fund
(Defined Benefit), Bradford, U.K.
Total
Fund
Amt (Mlns)
Type
USD 66,318
Trust Fund
GBP 550
Corporate D.B.
GBP 167
Corporate D.B.
Mandate
Size
(Mlns) Consultant
N/A
None
N/A
N/A
10
Watson Wyatt
Comments
Reportedly adding further private equity to its portfolio over the next year.
Plans to gradually increase alts allocation to 5% of assets.
May make a maiden 5% allocation to alternatives after review.
New Searches
City of Overland Park, Overland Park, KS
USD 55.3
Public D.B.
2
Dahab Associates
RFP is available at (http://www.dahab.com). Proposals are due March 31,
with final presentations planned for May 10.
Has invested 2.5-3% of its assets in private equity. Its target is 5%.
Has completed an asset/liability modeling study and plans to increase its 6%
hedge fund allocation by 1-2%. Will invest in single-manager hedge funds.
Orange County Employees Retirement System, Santa Ana, CA
Stichting Algemeen Pensioenfonds
Provisum, Amsterdam, The Netherlands
USD 5900
EUR 1150
Public D.B.
Corporate D.C.
118
Callan Associates
None
AP-Fonden 1, Stockholm, Sweden
SEK 171600
Public D.B.
0
Employees Provident Fund, Sarawak, Malaysia
Los Angeles City Employees Retirement System
(LACERS), Los Angeles, CA
San Francisco City & County Employees Retirement System,
San Francisco, CA
Washington State Investment Board, Olympia, WA
USD 66318
USD 9000
Trust Fund
Public D.B.
40
20
Mercer Investment
Consulting
N/A
N/A
No longer expects to make investments in hedge funds once it completes
private equity appointments.
Reportedly appointed Ripplewood and AIG.
Committed to Polaris Venture Partners V and Pharos Capital Partners II-A.
USD 13300
Public D.B.
74
Portfolio Advisors
USD 61200
Public D.B.
1540
Capital Dynamics
Committed to CIM Urban REIT, Urban America II and Charterhouse
Capital Partners VIII.
Committed to the KKR 2006 and OVP Venture Partners VII funds.
Completed Searches
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 [email protected].
Data Zone
This week, we revisit global macro funds. The table below displays some of last month’s top performing managers in
this sector, according to data provided by Eurekahedge. Readers are welcome to submit their feedback and suggestions to managing editor Nathaniel Baker at 212-224-3648 or [email protected] data is deemed to be
reliable, however AIN cannot vouch for its accuracy. For questions please contact Eurekahedge.
Global Macro Funds
Fund
Manager
Country/
Region Focus
2005
Return %
Standard
Deviation
Sharpe
Ratio
AuM
(US$ Million)
Greater Europe Fund
The Eclectica Fund
MLM Macro - Peak Partners
MLM Macro - Peak Partners Offshore
Clarium Capital
Ashmore Emerging Economy Portfolio
Everest Capital Global
BSAM Emerging Markets Macro Overseas
Opportunity Unique
Superfund Q-AG
Swordfish Fund
Cima Aconcagua Fund
Linnaeus Fund
Japan Macro Fund
Auriel Global Macro Fund
Standard Bank Fund Administration Jersey
Eclectica Management
Mount Lucas Management
Mount Lucas Management
Clarium Capital Management
Ashmore Management Company
Everest Capital
Bear Stearns Asset Management
Opportunity Asset Management
Quadriga Trading Management
JL Capital
Cima Investments
VegaPlus Capital Partners (USA)
Japan Macro Fund
Auriel Capital Management
Europe
Europe
North America
North America
North America
Latin America
North America
North America
Latin America
North America
Asia
Latin America
Europe
Asia
Asia
20.57
12.67
10.45
10.36
8.70
8.39
7.70
6.36
6.22
5.70
4.54
3.48
2.65
2.50
2.30
23.08
19.32
16.23
19.66
22.34
15.84
21.32
11.91
6.49
23.59
9.21
22.23
11.41
44.35
11.56
1.42
1.08
0.97
0.77
2.06
23.71
0.63
4.39
1.54
0.77
0.62
0.96
0.69
0.44
0.10
334
428
231
330
1667
250
280
989
150
338
166
100
103
150
130
Previous DataZone
Appearance
Jan. 23
Jan. 23
Jan. 23
Jan. 23
Eurekahedge Commentary: Global Macro Hedge Funds
Macro hedge funds got off to a solid start in 2006, taking the benchmark Eurekahedge Macro Hedge Fund Index up 1.9% for January on the strength strong equity & commodity markets, stable credit markets and the fillip to investor confidence on expectations of an end to the Fed rating cycle. The month proved particularly favorable for North American and European funds,
which posted stellar returns of 3.3% and 2.9% respectively. Asian macro funds on the other hand underperformed relative to their US and European counterparts, owing to increased volatility
in the Asian markets, particularly Japan, which was hit by the Liverdoor stock manipulation crisis mid-month.
Copying prohibited without the permission of the publisher.
9
AIN022706
2/23/06
7:32 PM
Page 10
Alternative Investment News
www.iialternatives.com
February 27, 2006
the reinsurance sector [because] of the assumption that
premiums will increase and the companies will have additional
cashflow,” explained Lenny Zephirin of The Zephirin Group,
an independent research firm. The assumption is based on the
fact that disasters spike the demand for insurance and
reinsurance policies, allowing the companies who write them to
increase prices.
PXRE’s stock price plunged 66% last week after the
company announced its net pretax estimate of losses from last
year’s hurricanes had increased by as much as $311 million,
bringing total hurricane losses to as much as $788 million. “It
will definitely impact the major insurance companies,” said
Zephirin. Because reinsurance companies hedge liability by
trading risk with each other, analysts and others expect the
PXRE effect to ricochet throughout the space. XL Capital and
RenaissanceRe reported substantial fourth-quarter losses earlier
last month, in large part due to hurricane-related losses, but
neither stock has mimicked PXRE’s fate. XL’s stock price has
increased in recent weeks. Calls to the companies were not
returned by press time.
—Nathaniel Baker
HEDGE FUNDS PILED
(continued from page 1)
San Francisco firm increased its stake from 1,115,688 shares in
Q305 to 2,531,889 at the end of last quarter, according to SEC
filings. SEC Rule 13F states that investment firms with stock
holdings worth $100 million or more must disclose these to the
public. Wellington Management was Arch Cap’s third-largest
institutional shareholder as of Dec. 31. D.E. Shaw, Citadel
Investment Group, Balyasny Asset Management, Caxton
Associates, Renaissance Technologies and Pequot Capital
Management are among other hedge funds with stakes in the
company. Its stock price has increased nearly 50% since the start
of Q305. Wellington is the second-largest institutional
shareholder in RenaissanceRe Holdings and the third-largest in
Everest Re Group. Endurance Specialty Holdings’ biggest
shareholders include Perry Partners International. For more, see
the chart below. In nearly all cases, the firms’ Dec. 31 holdings
increased—sometimes substantially—over Q3 allocations.
“Whenever a natural disaster occurs, people like to pile into
Hedge Fund Holdings In Reinsurance Companies
HEDGE FUND
FIRM
ARCH
CAPITAL
ENDURANCE
SPECIALITY
Farallon
Caxton
D.E. Shaw
Balyasny
Citadel
Perry Partners
Wellington
Amaranth Advisors
Renaissance
Cantillon Capital
Pequot
2,531,889
141,249
580,000
260,704
524,000
14,900
74,841
222,712
7,132,944
1,898,913
368,900
150,100
15,000
362,500
EVEREST RE
57,336
9,055,000
13,200
25,357
3,259,824
57,000
321,900
283,344
817,170
MAX RE
CAPITAL
PXRE GROUP
136,932
5,834,091
1,116,947
67,449
2,269,799
1,056,000
RENAISSANCE RE
REINSURANCE
GROUP
35,000
XL CAPITAL
181,521
12,100
15,000
688,150
943,509
180,000
und.
3,824,762
60,800
1,348,865
85,896
67,900
131,300
20,000
Shares held on Dec. 31
iisearches posted over $2.7 trillion
in business leads in 2005...
The premier daily sales and marketing tool for investment managers.
...grow your business with
the latest daily search leads.
For further information on iisearches’ daily search leads and searchable database of search-and-hire activity since 1995, visit
www.iisearches.com or contact Keith Arends in New York at 212-224-3533 or at [email protected], or
Ben Grandy (Europe and rest of the world) Tel: +44 (0)20-7779-8965 or at [email protected]
AIN022706
2/23/06
7:32 PM
Page 11
February 27, 2006
www.iialternatives.com
EX-SOROS MANAGER
Alternative Investment News
Quote Of The Week
(continued from page 1)
inflation book at BNP Paribas. Johan Liljefors, an analyst, was
previously the risk manager responsible for the macro portfolios
of the Quantum Fund. Trader Adam Grunfeld was a proprietary
equity trader at Goldman Sachs.
BAM is run by Dmitry Balyasny, previously a top trader at
Schonfeld Securities. O’Shea has founded COMAC Capital,
which is seeking authorization from the Financial Services
Authority and registration with the Securities and Exchange
Commission.
—Mark Faro
KKR TO
(continued from page 1)
which has financed over $162 billion worth of deals, is the latest
private equity name to move in the opposite direction. Carlyle
Group and Blackstone Group launched hedge funds at the end
of 2004 with $3 billion and in 2005 with $500 million,
respectively.
The KKR fund will require a $5 million investment
minimum and will have two separate investor classes. For
Class A investors, the management fee will be 2% with a
performance fee of 20% and two-year lockup. For Class B
investors, the management fee will be 1.5% and performance
fee is 15% with a five-year lockup. The prime broker is not
yet known.
—Elana Margulies
The Long & Short Of It
Going Short: International Management
Associates. The Atlanta-based hedge fund
firm is under attack from former and
current National Football League players.
Steve Atwater, Terrell Davis, Ray Crockett,
Rod Smith, Clyde Simmons and Blaine
Bishop are hopping mad and have filed suit
against the firm, according to a report in the Rocky
Mountain News. The players are ticked off because they allege that
the hedge fund, run by Kirk Wright, misled them about risk
parameters. The fund apparently invested two-thirds of its assets
in a short position in Time Warner, which produced losses. The
players, many of which have ties to the Denver Broncos, also
allege that the firm never provided audited financial statements.
Atwater, Davis and Crockett formerly played for Denver, while
Smith is currently active as a wide receiver. Simmons played for
multiple teams including the Philadelphia Eagles, and Bishop
played for the Houston/Tennessee Oilers. AIN is going short on
the alleged fraud, and if proven to be true, we are going long on
the idea of letting Atwater, who was known for his hard-hitting
prowess, use the managers for tackling practice.
“Seagate Technology’s technology leadership and manufacturing
agility coupled with the pending acquisition of Maxtor will enable
them to reap the benefits of this next chapter in the industry’s
history.” —An investor letter by Baton Rouge, La.-based Maple Leaf
Partners, touting its long position in the Cayman Islands data storage
company (see story, page 6).
One Year Ago In Alternative Investment News
$4.2 billion DKR Capital developed a structured credit team,
led by Jawahar Chirimar, former head of credit trading in Asia
for Lehman Brothers, to launch DKR Varick Fund. [The $100
million fund launched the following month, but by October, the
firm decided to close it down. At that time, it was down 7%
since inception. Chirimar and his five person team were due to
depart at year-end (AIN, 10/21).]
Coffee, Tea or Whatever Else?
In any given week, AIN is deluged with a variety of press
releases from firms hoping to attract hedge funds’ business.
Most of these are of the generic “leading service provider
provides complete/targeted/innovative end-to-end solution”
variety and are not given further thought. But every once in a
while, AIN gets something moderately entertaining or even
somewhat puzzling. What follows is definitely in the latter
category. One can only wonder what “I can cater to your needs
in any way that you desire,” implies. Talk about the friendly
skies… Read on.
Dear Mr. Baker,
We are the largest provider of private aircraft in the US and fly
the captains and leaders of virtually every industry you can think
of. I can cater to your needs in any way that you desire. Not
only can I provide private air services, I can also provide ground
transportation, hotel accommodations and whatever else is
needed to make the trip go as smoothly as possible. If there is a
magazine, favorite drink, special snack that you would like, I
would be delighted to take care of that for you. Nobody will
pay closer attention to the trip than I will. There is no trip too
small or too large. I am confident that we will exceed all of your
expectations.
I always have your best interest in mind. You make one call
to me and I do the rest. We will send your itinerary and specific
requests to several vendors/owners and find you the right plane
at the best price. I only need five hours notice to get the job
done and you can call me anytime 24/7. I look forward to
earning your business and becoming your private aviation
specialist. Thank you for your time and attention.
Copying prohibited without the permission of the publisher.
11
Project1
2/13/06
3:03 PM
Page 1
I chose Calyon Financial because
institutional business is their only business.
Focus
At Calyon Financial, we focus on the
specialized needs of institutional customers.
Efficient execution and clearing of orders.
A complete suite of straight through
processing tools. Customized electronic
trading solutions. By delivering on these needs
and more, Calyon Financial has earned its
place as a leading global brokerage firm.
Now that’s a good choice.
calyonfinancial.com
Nothing contained herein should be considered as an offer or the solicitation of an offer to sell or to buy any financial instruments discussed herein. Calyon Financial SNC is authorized by Banque de France. In the UK, Calyon
Financial SNC’s London Branch is regulated by the Financial Services Authority for the conduct of designated investment business in the UK. In France, Calyon Financial SNC is regulated by the Autorité des Marchés Financiers
and by the Commission Bancaire. Calyon Financial Inc. is a member of SIPC and NASD. © Calyon Financial. All rights reserved.