glg kick-starts macro fund castle arch launches lease-to

ain030909
5/3/09
19:32
Page 1
GLG KICK-STARTS MACRO FUND
MARCH 9, 2009
VOL. X, NO. 9
Institutions Rule The Roost
The majority of hedge fund assets now
come from institutional investors after
redemptions from high-net-worth
individuals, according to new findings
by the Alternative Investment
Management Association.
See story, page 2
At Press Time
Atlas Preps Asia Fund
2
The Americas
Tudor Pushes Tensor Fund
JER Targeting LatAm Countries
Lionhart Eyes Asia, Europe Opps
Tremont Folds Sales,
Marketing Teams
Alkek Sues Tuckerbrook
3
3
4
5
8
GLG Partners launched a new global macro fund last Monday. The GLG Atlas Macro Fund
is run by Driss Ben-Brahim, who joined GLG from Goldman Sachs last year, and Jamil
Baz, who is ex-Goldman, Deutsche Bank and PIMCO.
The fund will invest primarily in the G8 countries and emerging markets, according to a
Credit Suisse cap intro document obtained by AIN. It will undertake short-, medium- and
long-term positions, primarily investing in liquid instruments. The fund will invest across
equities, currencies, fixed income and commodities. It will target returns of 20% annualised,
(continued on page 16)
ROCKLEDGE ENTERS HEDGE FUNDS
WITH SECTOR PLAYS
The Rockledge Group is getting into hedge funds for the first time with the launch of
two funds that will rotate their exposures to various sectors. The firm rolled out a Europefocused fund, Sector Alpha Europe, last month. Vlad Dimanshteyn and Alex Gurvich, cofounders, are on the lookout for a seed investor to launch a U.S.-focused version, Sector
Alpha, by mid-year. The managers want $50 million from a seed investor for the U.S.
version; several institutions and high-net-worth individuals are lined up to allocate
(continued on page 16)
Europe
SAR Shuts Green Funds
Puddle Splashes Into Consultancy
Arkanar Names Launch Date
German Trio Plots Alts Push
Polaris Seeks Funds
9
9
10
10
11
Asia Pacific
HK Shop Unveils Commodities FoF
11
Departments
Short Takes
Performance Snapshot
Search Directory
Mandate Scoreboard
11
12
13
14
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 2009 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.
BREVAN HOWARD PLOTS UCITS BLITZ
Brevan Howard Asset Management is planning a series of Ucits III funds targeted at pension
funds and other institutions. The firm has already launched the Absolute Return Bond Plus
Fund with $250 million from the Brevan Howard Master Fund. It will open to investors at
the end of March. The $25 billion firm plans to follow this up with launches focused on
foreign exchange, long/short equity and emerging markets, Keith Patton, product manager,
told AIN.
With the Bond Plus fund, the firm wants to lure institutional investors that have until
now held long-only fixed-income exposures, returns from which have an inherently high beta
(continued on page 15)
CASTLE ARCH LAUNCHES LEASE-TO-OWN FUND
Castle Arch is raising a fund that will purchase and lease distressed residential properties.
The Beverly Hills, Calif.-based company will purchase the properties from regional
banks, hedge funds and other investors. The fund will target tenants that are unqualified
to buy homes.
Other funds may follow as managers take advantage of low prices and tap into the
distressed market. Lease-to-own strategies are one of the safest ways to get into the game,
according to Edward Endicott, business development manager at law firm Frost &
Sullivan. More traditional ways to invest in distressed properties include purchasing pools
(continued on page 16)
Check www.totalalternatives.com during the week for breaking news and updates.
ain030909
5/3/09
19:32
Page 2
Alternative Investment News
www.totalalternatives.com
At Press Time
White Plains Firm To Launch
Asia EM Fund
Atlas Capital Management is launching the K-Atlas Asia
Opportunity Fund, an emerging markets long/short equity fund, in the second
quarter. The fund will be a carve-out from Atlas’ Discovery Atlas Master Fund
and can hold fewer than 25 positions, long or short.
White Plains, N.Y.-based Atlas was founded in 2003 by Rogerio
Chequer, David Chon, Jason Huemer and Harry Krensky. The firm has
$305 million under management as of Feb. 1. It launched a Singapore
affiliate in February 2008.
The fund will have an investment minimum of $1 million with a
performance fee structure of 2/20. Calls to the firm were not returned.
Institutions Account For Most
Hedge Fund Assets
The majority of hedge fund assets under management now come from
institutional investors as high-net-worth individuals bail out and pension funds
continue to up their allocations, according to a study by the Alternative
Investment Management Association.
Traditionally, money from high-net-worths has filled a large proportion
of hedge funds’ coffers, but the survey of the industry body’s members
suggests institutional money—particularly from pension funds—has
increased to the point where it constitutes an absolute majority, said Tom
Kehoe, research manager.
“Institutional investment has increased from a third of global AUM three
years ago to over half that figure now, with our assessment of global AUM
being somewhat to the north of $1 trillion,” said Christen Thomson,
spokesman.
The trend has been fuelled partly by increases from institutional investors,
but also by redemptions suffered by the hedge fund industry, Thomson told
AIN. “Recent redemptions have been largely from high-net-worth
individuals,” he said. “What that means is that as AUM has fallen
dramatically, it has increased the overall percentage [from] institutions.”
The trend is expected to continue, as hedge funds post positive
performance while equity returns haemorrhage. “[Institutional investors] are
the big boys and what they want in this current situation are the ones who
can deliver positive returns,” said Thomson. “If you’re a pension fund with a
bunch of equities that are losing value, you need some means of getting
positive returns and alternatives are offering a good way of doing that.”
The AIMA study did not disclose exact figures, but Kehoe said findings
are informed by all data at the body’s disposal. The study quizzed 1,200
members across 43 countries, including hedge fund managers, fund of funds
managers, advisers and service providers. The research defined institutional
investors as pension funds, university endowments, foundations and
government authorities.
2
March 9, 2009
EDITORIAL
TOM LAMONT
Editor
STEVE MURRAY
Deputy Editor
ROBERT MURRAY
Managing Editor and
London Co-Bureau Chief
(44-20) 7303-1705
HARRIET AGNEW
Senior Reporter [London]
(44-20) 7779-8261
PUBLISHING
ELAYNE GLICK
Publisher (212) 224-3069
ANIA TUMM
Marketing Manager [London]
(44-20) 7779-8219
LAURA PAGLIARO
Renewals Manager (212) 224-3896
CHRISTOPHER DUNNE
Associate Marketing Manager
(212) 224-3096
SUZY KENLY
Senior Reporter [New York]
(212) 224-3978
VINCENT YESENOSKY
Senior Operations Manager
(212) 224-3057
CORRIE DRIEBUSCH
Reporter [New York]
(212) 224-3271
DAVID SILVA
Senior Fulfillment Manager
(212) 224-3573
HUGH LEASK
Contributor [London]
(44-20) 7303-1788
SUBSCRIPTIONS/
ELECTRONIC LICENSES
VENILIA BATISTA AMORIM
London Co-Bureau Chief
(44-20) 7303-1718
STANLEY WILSON
Washington Bureau Chief
(202) 393-0728
KIERON BLACK
Sketch Artist
PRODUCTION
DANY PEÑA
Director
LYNETTE STOCK,
DEBORAH ZAKEN
Managers
MELISSA ENSMINGER,
JAMES BAMBARA,
DOUGLAS LEE
Associates
JENNY LO
Web Production & Design Director
ADVERTISING AND
BUSINESS PUBLISHING
JONATHAN WRIGHT
Publisher
(212) 224-3566
PAT BERTUCCI, MAGGIE DIAZ,
LANCE KISLING
Associate Publishers
BRIAN GOLDMAN
Advertising Production Manager
(212) 224-3216
LESLIE NG
Advertising Coordinator
(212) 224-3212
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
One year $4,595 (in Canada add $30
postage, others outside US add $75)
DAN LALOR
Director of Sales (212) 224-3045
MATT COLBECK
Account Executive [New York]
(212) 224-3568
MARK GOODES
Account Executive [London]
(44-20) 7779-8605
KAREN CHU
Account Executive [Hong Kong]
(852) 2912-8011
REPRINTS
DEWEY PALMIERI
Reprint & Permission Manager
(212) 224-3675
[email protected]
CORPORATE
GARY MUELLER
Chairman & CEO
CHRISTOPHER BROWN
President
STEVE KURTZ
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: (44-20) 7303-1705 [London]
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 ©2009
Institutional Investor, Inc. ISSN# 1544-7596
Copying prohibited without the
permission of the Publisher.
ain030909
5/3/09
19:32
Page 3
March 9, 2009
www.totalalternatives.com
Alternative Investment News
The Americas
Tudor Touts Tensor Fund
Paul Tudor Jones’ $10.5 billion Tudor
Investment Corp. is preparing to market its
Tudor Tensor Portfolio to investors. Tensor, a
computerized multi-strategy systematic
managed futures fund, uses multiple
quantitative models to trade commodities,
foreign exchanges, global fixed income, stock
Paul Tudor Jones
indices and other financial instruments. It has
$876 million in assets, according to a capital introduction sheet,
and returned 36% last year.
Shawn Pattison, Tudor spokesman, declined to say whether
the funds assets had been buffeted in recent months by
redemption requests or what the target is for increased assets.
In December, the firm halted redemptions from its flagship
Tudor BVI Fund. Jones planned on restructuring the portfolio to
segregate the toxic assets, the Financial Times reported.
The Tensor fund is managed by Steve Evans, who joined Tudor
in 1997. Previously he was global head of software development at
D.E. Shaw & Co. Between ages 14-21, Evans developed video
games for retail, which helped put him through college.
The Tensor fund launched in September 2005. Its prime
brokers are JPMorgan, Goldman Sachs, Barclays Capital and
Credit Suisse. Fees are 2/20 with a $5 million investment
minimum for institutions and a $3 million minimum for
individuals. It has a high watermark, with quarterly redemptions
with a 45-day notice. There is no lockup or redemption penalty.
JER Tabs Latin Fab Four
Private equity firm J.E. Roberts Companies’ Latin American
division is seeing opportunities in Mexico, Brazil, Peru and
Colombia. Ariel Amavizca, director and head of risk
management, noted that those four countries are “better at
weathering a crisis than in the past” as they now have central
banks with higher reserves. “Given that debt markets continue
to be very restrictive in providing financing, JER is looking for
opportunities in markets that have been historically less
dependant on debt to make deals and IRR’s work, such as
Brazil, Colombia and Peru,” Amavizca said. In Mexico, he said
the firm is seeing a demand for “necessity” real estate. “Groceryanchored neighborhood retail centers and affordable housing
are going to be sustained by a growing middle class,” he
predicted. While the firm is avoiding investing directly in Chile,
Amavizca said it is trying to partner with Chilean developers
interested in opening branches in Colombia and Peru.
Since October 2008, Amavizca said JER has been looking at
distressed owners of quality assets. For instance, in some cases
banks were financing projects but that financing has since dried
up. In other cases some attractive real estate had inadequate
financial structures and was highly levered. In both situations,
JER can now purchase these assets at significantly lower prices.
JER established its Latin America division last year
(totalalternatives.com, May 26) with offices in Sao Paulo and
Mexico City. Headquartered in McLean, Va., JER has
purchased and managed approximately 15,000 assets totaling
$28 billion across 17 countries.
BlueMountain Credit Staffer
Lands At BNP
BNP Paribas has hired Sebastien Cottrell as a v.p. in structured
credit trading in New York. He joined yesterday from
BlueMountain Capital Management, where he was a structured
credit trading portfolio manager. A spokesman for BlueMountain
said his responsibilities have been passed to another employee,
declining to elaborate.
Cottrell’s role is a new one that expands BNP’s credit trading
team in the U.S. under Olivier Renart. Cottrell will also report
to Romain Blanchard in London. Renart was not immediately
available for comment.
Juno Bearish On Cocoa, Silver
New York-based Juno Mother Earth Asset Management is
bearish on cocoa and silver and bullish on cotton and wheat. The
JME Commodities Strategy Fund got into the short cocoa position
three weeks ago, CIO Arturo Rodriguez told AIN.
“We felt that market was overdone,” Rodriguez said on cocoa.
The fund shorted cocoa at $2,600 per ton. On Monday, the
price was at $2,215, and the fund will cover the short at $2,000.
Juno Mother Earth also spent a few weeks short silver,
having recently covered its short at $1,300. “I think the
fundamentals are not very promising,” Rodriguez said on silver.
“[It’s] primarily used for industrial purposes, and I don’t think
we’ll see an up-tick in industrial production until much later in
the year.” Plus, silver is not a typical “flight-to-quality type of
investment” such as gold, he added.
The firm expects cotton and wheat to turn around, given both
commodities are trading at historically low values. Through Monday,
cotton was trading at $41.30 a bail, and wheat at $5 a bushel.
“They’ll come back a lot; they’re at that point,” Rodriguez said.
Once the United States Department of Agriculture
(USDA) releases its planting intentions March 30—which
predicts the expected acreage for corn, wheat, soybeans and
To receive email alerts or online access, call 800-715-9195.
3
ain030909
5/3/09
19:32
Page 4
Alternative Investment News
www.totalalternatives.com
March 9, 2009
The Americas (cont’d)
cotton for 2009—Juno Mother Earth will have a much clearer
forecast, Rodriguez added.
In January, the fund was up 3.5%. The firm does not yet have
February’s numbers. Rodriguez, Eugenio Verzili and Ronald
Jansen co-founded Juno Mother Earth in September 2006.
Packard MD Leaves After
Brief Spell
Jinde Guo left the David & Lucile Packard Foundation on Feb.
27 after working there for only a few months. She joined in
November as managing director focused on hedge funds, equity
and fixed income (totalalternatives.com, Nov. 11). Guo is leaving
of her own accord, Anastasia Ordonez, spokeswoman, told AIN,
though she would not make Gun available for comment to
confirm that or discuss where she is going.
Before joining the Packard Foundation—established by the
Packard family of Hewlett Packard—Guo worked at the John
D. and Catherine T. MacArthur Foundation. She was
responsible for that foundation’s overall asset allocation. She
helped select hedge funds and private equity funds, oversaw its
fixed-income portfolio and evaluated international strategies.
The Packard foundation has roughly $5 billion in assets.
For Your Eyes Only
MFA Lobbies Nasdaq For HF
Privacy Safeguards
The Managed Funds Association is asking Nasdaq to revise its
plan for sponsored access to prevent hedge funds’ trading data
falling into unfriendly hands. Nasdaq has proposed updating
Rule 4611 to make sure that the exchange, as well as members
assuming responsibility for their customers’ trading activity,
have effective oversight of sponsored participants. According to
an MFA comment letter sent Feb. 24, the rule would give
sponsoring members and the exchange broad authority to
examine the books and records of sponsored participants and
authority to obtain information about their trading activity.
Some of the MFA’s members would fall under the rule as
sponsored participants on Nasdaq.
The MFA said it supports giving sponsoring members and
Nasdaq access to information to allow them to comply with
regulatory requirements. But it expressed concern that the
proposal lacks confidentiality safeguards and controls to protect
firms’ trade data and to assure investors that this information
would be used purely for regulatory purposes. “A market
participant’s trading data constitutes highly proprietary
4
information that, if made publicly available, could be used to
reverse engineer trading strategies,” the MFA said. “Moreover,
access to such data and to a market participant’s books and
records could create opportunities for front-running and
possibly even insider trading.”
A spokesman for Nasdaq said the exchange would not
comment on individual comment letters but will consider its
response once all submissions have been made.
Houston Firm To Launch
Second Fund
Capital Point Partners, a hedge fund firm in Houston, plans to
launch its second fund in the next two or three months and will
market it to institutional investors. The firm closed its first fund,
Capital Partners Fund I, in December at $125 million, said a firm
official. The fund will invest mezzanine capital, about $3-15
million at a time, in buyouts, recapitalizations and mergers and
acquisitions, the same strategy as Fund I. It is seeking
opportunities in manufacturing and service-oriented businesses
and distributors and retailers, among others.
Capital Point was launched in 2005 by Alfred Jackson, who
before co-founding the fund was a principal at Davis
Hamilton Jackson & Associates, and Jeff Sangalis and Don
Rice, who together founded RSTW Partners and Rice
Sangalis Toole & Wilson.
Lionhart Turns To Overseas
Convertible Bonds
Toronto-based hedge fund and private equity
firm Lionhart is looking to Asia and Europe
for convertible bond opportunities for its
latest fund, the Lionhart Enhanced
Opportunities Fund. There are a handful of
convertible bonds in Asia and Europe, and
“oddly enough, a couple of financial
Tom Scanlan
institutions that have managed to
outperform the current bloodbath that everyone else seems to
be caught in with subprime and derivatives,” said Tom
Scanlan, director of business development. He declined to
name them or offer more specifics.
Because convertible bonds are further up on the capital
structure, they have become more attractive, Scanlan added. The
firm is eying select opportunities for convertible bonds in the U.S.,
but will focus on Asia and Europe for now.
The fund launched late last year, and is up roughly 10%
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
ain030909
5/3/09
19:32
Page 5
March 9, 2009
www.totalalternatives.com
Alternative Investment News
The Americas (cont’d)
through Feb. 27. It invests in convertible bonds, high-yield
bonds, and distressed debt and late stage M&A deals in
Europe and Asia, and selectively, the U.S. The fund has
$10 million under management, which it hopes to grow to
$100 million.
Interviewing Alts Managers
Maryland Fund Makes Its Move
The $28 billion State Retirement and Pension System of
Maryland is starting to interview managers in distressed debt,
infrastructure and buyouts to fill out its private equity and real
asset portfolios. It is also meeting with real estate and absolute
return managers to reach increased target allocations
established in September. The fund is poised to make $7
billion in commitments to alternative assets overall, said CIO
Mansco Perry. No RFPs will be issued. Until now, the fund’s
staff has been busy with searches and manager hires in the
traditional portfolios.
New mandates will be funded with assets from the public
equity and fixed-income portfolios, which are over-allocated.
The fund will also use cash, which now makes up 10% of the
portfolio. Perry said it could take up to five years to reach
new targets.
Maryland last year upped its private equity allocation to 15%
from 5% and has about 4% already committed. The fund also
carved out 10% each to real estate, real return and absolute
return strategies. It now has 6% committed to real estate, 4% to
real return and 2% to absolute return. The plan is looking at
new managers to diversify these portfolios, Perry said.
San Antonio Fires Silver Creek
Over Madoff Losses
The $1.8 billion San Antonio (Texas) Fire & Police Pension
Fund has terminated fund of funds firm Silver Creek Asset
Management for losses tied to the alleged Bernard Madoff
Ponzi scheme. According to meeting minutes, the plan had a
$450,000 exposure to Madoff though Silver Creek. Jonathan
Gasthalter, spokesman for Silver Creek, declined to comment.
Warren Schott, executive director and cio for San Antonio, did
not return calls. The plan hired Silver Creek in 2005 for a
$30 million mandate.
The fund has also terminated fund of funds manager
Marwood Group Asset Management from a low-volatility
mandate. San Antonio’s investment committee, which meets
separately from the board, advised the board to terminate
Marwood in September for performance, but the motion didn’t
pass at that time, according to meeting minutes. Marwood has
been on watch since September. Brian Rathjen, spokesperson
for Marwood, did not return calls.
Separately, the fund has hired Golden Tree Asset
Management for a $35 million high-yield/bank loan mandate.
The other finalists were SMH Capital Advisors, Artio Global
Investors, DDJ Capital Management and Post Advisory
Group. Spokespeople for the firms either did not return calls or
declined to comment.
Tremont Axes Sales,
Marketing Team
Tremont Capital Management has dismantled its sales and
marketing force as a result of asset losses and redemptions in
its funds of funds due to ties to Bernard Madoff. Bob Stone,
managing director of institutional sales, was the last to leave
last week. Others let go included Maureen Garrity, head of
consultant relations, and Dave Elliott, who marketed to
wirehouse banks and brokers. All three joined the firm last
year. Tremont is retaining two marketing and sales staffers
abroad—in Hong Kong and London, said spokesman
Montieth Illingworth. The firm is also keeping its client
service team, which handles requests and questions from
existing clients. The sales and marketing team used to pitch
Tremont’s strategies to prospective clients. Illingworth
declined to say how many people were let go overall.
Several hedge fund managers and consultants who have
been in touch with Tremont officials said the firm will likely
shut down due to steep asset losses or the officials will rebrand the institutional arm to build the business back up.
Illingworth declined to comment on their speculation. The
institutional line-up was not as hurt by Madoff exposure as
the retail division, a hedge fund manager said. Tremont’s
single manager hedge fund was called Rye Investment
Management. It catered to high-net-worth individuals and
invested all of its $3.1 billion in Madoff. Rye was shut down
in January.
Tremont’s funds of funds had $2.7 billion in assets under
management as of December. It had $200 million in
institutional assets invested with Bernard L. Madoff
Investment Securities before that, and, as a result, had to
halt redemptions. Illingworth declined to comment how
much money the funds have lost or what investors are
seeking in redemptions. The firm will report its new assets
under management at the end of the quarter.
To receive email alerts or online access, call 800-715-9195.
5
layout for Lance back to back pages022409 copy 14-37-11
2/25/09
3:21 PM
Page 1
Sponsored Article
DTCC’s Trade Information Warehouse Streamlines Payouts on Multiple Credit Events
by Frank De Maria III and Marisol Collazo
he ongoing global economic swoon has claimed a number
of casualties. A lengthening roster of corporate entities, plus
one sovereign, have declared bankruptcy, been nationalized
or otherwise defaulted on their debt.
For buyers and sellers of the credit protection—
counterparties to over-the-counter (OTC) credit derivatives—
written on these entities, the defaults have precipitated the busiest
period ever of credit event activity for the market. However,
innovative procedures and electronic functionality developed by
the industry, including The Depository Trust & Clearing
Corporation’s (DTCC’s) Trade Information Warehouse
(Warehouse) means today’s credit event processing is much less
labor-intensive and error-prone than several years ago.
In 2005 and 2006 the industry struggled to process the seven
credit events that transpired over that period. By contrast, since
early September 2008 there have been more than 20—and still
rising—credit events triggering payouts on credit
derivatives contracts. The manual, bilateral procedures available in
2006 necessitated a 10-day wait between recovery auction and cash
settlement, but today that interval has been cut in half, to five business days. The advances for the credit derivatives
market in terms of efficiency improvements and risk reduction
have been dramatic.
T
Building the Warehouse
DTCC launched Deriv/SERV’s Trade Information Warehouse, the
market’s only global repository and lifecycle post-trade
processing platform for OTC credit derivatives, in November
2006. Initially the Warehouse’s contract database was populated
with new OTC credit derivative transactions, matched and
confirmed through Deriv/SERV, but dealers soon began
back-loading their legacy trades. Today the vast majority of
outstanding credit derivatives contracts are registered in the
Warehouse.
The Warehouse’s credit-event processing capability went live
in 3Q 2007 and in November 2007 its central settlement service,
offered in collaboration with CLS Bank International, was
launched with a pilot group of major dealers.
In light of the ongoing credit crisis and its continuing
fallout, the Warehouse with its unique capabilities—central
contract registry, electronic processing functions and ability to
calculate and net payments—is proving to be an essential
infrastructure for reducing operational risk for market
participants.
The netting procedures have dramatically consolidated counterparties’ exposures and the Warehouse has also helped dispel
fears in the market that the ongoing string of
bankruptcies would destabilize the finances of those trading in
credit default swap (CDS) instruments. The values paid out in
credit events have been fractions of the total value of contracts
written on the entities in default. The eight credit events
(including Lehman Brothers) processed by the Warehouse in
October and November 2008 covered contracts with an
aggregate gross notional value of $196 billion, yet the net funds
transfers on these eight events came to only $12 billion.
Credit events timeline
Not until the bankruptcy of Canadian printer Quebecor World Inc.
in early 2008 was DTCC’s credit event processing
functionality deployed in a real-world scenario. Once the date of
the credit event had been determined and the auction held to
determine the recovery rate on Quebecor’s outstanding debt, the
Warehouse began calculating and netting payments in preparation
for final cash settlement on the affected CDS contracts. (See
next page for details on the industry’s credit event protocols.)
Dealers and buy-side firms representing nearly 90% of the eligible
Warehouse-registered single-name and index contracts
referencing Quebecor participated in the processing of this event.
Quebecor provided a good trial run for the Warehouse system
and led to enhancements to its original design. Now, rather than
designating each registered contract they want to include in the
settlement process, affected counterparties have the option to flag
only those contracts to be excluded from processing, greatly
simplifying the management of the larger and more frequent
credit events that have followed.
Since early October, the Warehouse has been firing on all
cylinders. On October 15, DTCC processed the credit events for
Federal National Mortgage Association (Fannie Mae), Federal
Home Loan Mortgage Corporation (Freddie Mac) and Tembec
Industries Inc. (Tembec). The three events set a record with over
200,000 trade sides calculated. Fannie Mae and Freddie Mac were
reference entities in the investment-grade indices, and Tembec a
reference entity in the high-yield indices.
Six days later, DTCC completed processing of the Lehman
credit event, the largest to date in dollar terms processed through
the Warehouse with approximately $5.2 billion in net funds
transferred from net sellers of protection to net buyers of
protection.
In the Washington Mutual Inc. (WaMu) credit event, which
settled on November 7, the net funds transfers covered
outstanding WaMu single-name CDS as well as CDS index (CDX)
contracts and CDS index tranches in which WaMu was a
component. It marked the first time index tranches were processed
in a credit event. WaMu was a component in approximately 35
indices serviced by the Warehouse, with component percentages
ranging from 0.80% to 4.17%.
November 20 marked the credit event processing for
outstanding single-name contracts on Icelandic banks Landbanki
Islands hf, Glitnir Banki hf and Kaupping Banki hf, nationalized in
early October. Cash settlement of contracts written on Masonite
and on Hawaiian Telcom occurred December 16 and December 29
respectively.
The January 2009 processing schedule included the Tribune
Company on January 16 and the Republic of Ecuador on January
23. February saw payouts on Lyondell Chemical, Millennium
America, Equistar Chemicals, Allied Waste, Sanitec, Nortel
Networks, British Vita, and Smurfit-Stone.
The chart below shows the events completed from October
2008 through February 20, 2009, along with the gross notional
value of contracts affected by each event and the net transfers of
funds from sellers of protection to buyers of protection for each.
layout for Lance back to back pages022409 copy 14-37-11
2/25/09
3:21 PM
Page 2
Sponsored Article
DTCC’s Trade Information Warehouse Streamlines Payouts on Multiple Credit Events
Beyond credit events, the Trade Information Warehouse is now
processing successor events, for example acquisitions and mergers,
for contracts registered in its repository. For instance, contracts
referencing mortgage lender Countrywide were renamed to
reference Bank of America in a successor event
completed February 10.
Through the recent and ongoing turmoil in global credit
markets, the credit event processing infrastructure has proved its
efficiency and resiliency to the benefit of all participants in the OTC
credit derivatives industry.
The Mechanics of Credit Event Processing
The over-the-counter derivatives industry has established a process
for valuing the outstanding bonds of corporate and
sovereign entities that default on their debt and for settling net
payments owed from net sellers of the related outstanding credit
protection contracts to the net buyers of those contracts.
First, an event determination date is agreed by the market.
Next, a Uniform Settlement Agreement published by the
International Swaps and Derivatives Association (ISDA®) is signed
by counterparties holding affected contracts, eliminating the need
for all counterparties to send notices to one another.
ISDA then publishes a protocol, to which counterparties
wishing to settle their contracts by its standards adhere. ISDA’s
protocol allows for a cash-settled auction procedure to determine a
final settlement price.
Participating bidders submit bids and offers for commitments
to enter as seller, or buyer, into representative auction-settled
transactions. From these, Markit Group and Creditex, who jointly
administer the auction, determine the post-credit event value
expressed in cents on the dollar of outstanding bonds issued by the
reference entity. High values, like the 99.9 cents on the dollar
recovery value for Fannie Mae subordinated notes translate into
low payouts from sellers of credit default swaps to buyers of these
contracts, while low auction-derived values such as the 1.5 cents on
the dollar for Tribune Company CDS result in high payouts.
Based on the auction-established recovery rate, the Warehouse
calculates both the recovery amount as well as
applicable coupon adjustments for relevant contracts.
Calculated amounts are netted on a bilateral basis, and then for
firms electing to use the settlement service, transmitted to DTCC’s
settlement partner, CLS Bank International, where they are settled
on a multi-lateral net basis. Currently all major global credit default
swap dealers use CLS Bank to settle obligations under credit default
swaps. Buy-side firms are now coming on board and it is expected
that all major institutional players in the credit default swap market
will use the same process for settlement by the end of 2009.
The Trade Information Warehouse is a service offering of DTCC
Deriv/SERV LLC, a subsidiary of DTCC.
Frank De Maria III is a managing director at DTCC and chief operating officer, DTCC Deriv/SERV. Marisol Collazo is vice president,
DTCC Deriv/SERVBusiness Development.
/$%&,
,
*'++'-'&$;9)0"1:
9;*(*+&,+"& $%
'-'&$'&$4:
,0&+
*&+*+9
)0"1:
*&&-,4
,*&+-'&+
&&"6
*"6
%
"& $%&
&3
AE8,8@H
!%&*'+7
&7
"& $%'&$4
BA8,8@H
=GB
=E7B
+!"& ,'&0,0$
"& $%&$4
G8'18@H
=DA
=A7D
&+&#"6
$",&"*60(,!"&
"& $%&$4
B@8'18@H
=GA
=D7FE
=II
=DBI%
*"0&'%(&4
"& $%6
&3
AF8&8@I
=BD7I
=B7FE
(0$"'0'*
"& $%6
&3
BC8&8@I
=B7F
=C@@%
4&$$!%"$
"$$&&"0%%*"
)0"+,*!%"$+
"& $%6
&3
A@88@I
A@88@I
A@88@I
=G7H
=DDH%
'*,$,2'*#+
"& $%6
&3
AH88@I
=E7F
=EAH%
*&&-,4
,*&+-'&+
/$%&,
,
*'++4%&,%'0&,+
,0&+
*&+*+9
)0"1:
+'&",
&"+&$4
AF88@H
=FGC%
=E@7D%
2""&$'%
&"+&$4
BI88@H
=HHH%
=EF7A%
$$"+,
0*"+,*$4*%
A@88@I
=E7G%
=@7EF%
&",
9
'&$4:
AF88@I
=HA%
*"-+!",
9
'&$4:
B@88@I
=A@H7F%
=I%
=A@7E%
ain030909
5/3/09
19:32
Page 8
Alternative Investment News
www.totalalternatives.com
March 9, 2009
The Americas (cont’d)
Fridson To Add Portfolio Manager
Marty Fridson’s credit hedge fund firm,
Fridson Investment Advisors, is looking to
add a senior investment professional to its
three-person portfolio management team for
its flagship credit fund. The firm will likely
make a hire in the next few months and is in
the preliminary stages of the search process,
Marty Fridson
said Drew Lawton, president. The position
has been created due to growing interest from institutional
investors in the strategy.
Earlier this month the firm brought on John Creswell as
director of business development and consultant relations.
Creswell will be based out of Chicago, and will cover the
Midwest and Western United States, Lawton said. He joined
from Nuveen Investments, where he was co-director of the
firm’s taxable fixed income unit. Fridson has $230 million
under management. It is looking to grow to $2.5 billion.
Alkek Foundation Sues Tuckerbrook
The Albert and Margaret Alkek Foundation has filed a
lawsuit against Tuckerbrook Alternative Investments for not
allowing it to exit a distressed securities fund of hedge funds.
The dispute centers around former Portfolio Manager
Sumanta Banerjee’s departure from Tuckerbrook and whether
it triggered a clause in the limited partnership agreement that
would allow investors to withdraw funds. The litigation is
unique as such clauses, which are commonly known as keyman provisions, are very rarely triggered, but should become
more prevalent as investors look to exit illiquid investments
that are declining in value, said Murray Fogler, an attorney at
Becker Redden & Secrest, who represents Alkek.
Tuckerbrook notified fund investors in January 2008 of its
decision to begin the liquidation of the fund. The Houston-based
foundation wanted the bulk of its investment returned on May
31, 2008, and is miffed that Tuckerbrook continued to charge
management fees, according to a complaint filed in the Southern
District of Texas. Alkek initially invested $2.5 million in the fund
and is now seeking a full recovery of its investment as of May 31,
including any management fees charged after that date.
The clause in question stated that investors may withdraw 90%
of their capital from the fund within 30 days of learning that
Banerjee was dead, incapacitated or no longer involved in the
management of the fund. Tuckerbrook terminated Banerjee’s
employment in March, which triggered Alkek to pursue a
withdrawal. Banerjee, well-known in the industry from his days at
8
Commonfund, had a legal dispute with Tuckerbrook over control
of the fund (totalalternatives.com, April 30, 2008); both parties
eventually settled out of court (totalalternatives.com, Oct. 6).
Although Tuckerbrook terminated Banerjee, he remained a
managing member of the general partnership, according to a
motion to dismiss filed by Tuckerbrook. In response, Alkek argued
that Banerjee was merely holding a “titular position.” “The plain
language of the agreement permits plaintiffs to withdraw from the
fund in this very circumstance,” a court filing by Alkek says.
Sean Carnathan, an attorney with O’Connor Carnathan &
Mack, who represents Tuckerbrook, disagrees. Alkek, as a
sophisticated investor, should know that the general partnership
is a distinct entity from Tuckerbrook, which serves as the
investment adviser, he said. Fogler countered that Banerjee had
no authority to manage the fund following his termination,
making his title irrelevant. He added that Alkek only invested in
the fund because it knew and trusted Banerjee.
It’s not clear when the motion to dismiss will be ruled on.
In the event it’s denied, discovery will begin and a trial date has
been set for December.
www.totalalternatives.com
BREAKING NEWS
PM Starts
Ex-Soros, SAC
Shop
Global Macro
08
December 2, 20
at George
olio manager
, former portf
unded New
-fo
co
Josh Berkowitz
s
ha
s,
firm
even Cohen’s
will launch a
d
an
s
Soros’ and St
visor
ine Capital Ad
db
oo
W
d
se
witz were
York-ba
y. Calls to Berko
fund in Januar
declined to
o
wh
r,
global macro
de
rdsen, co-foun
Co
d
ar
ch
Ri
to
out the
referred
FE
y. Details ab
BRUARY 12
the firm’s polic
, 2009
launch
at
ts
se
comment, citing
its as
d
an
t,
es
inv
e it will
Soros, Permal
strategy, wher
Vets
rned.
Float N
could not be lea
olioFund
s a portfew
wa
tz
wi
J
os
rko
hu
Be
a
witz, a forme
Management, Soros Berko20
-2008r.portfolio mana
Funm
At Soros Fund
d Man05
ro fro
ger
agement, and
on global mac
former regiona
g
orchsard Cords at
sin
cu
fo
al AdvisRi
er
pit
l dir
Ca
en, a
C
manag
ect
SA
at
le
the Americas
ilar ro Permal Group, ha or forldm
sim
a
ld
at
an
the
he
e joiGo
ned forces to
dervat
Wootar
Previously, he
y tra
dbine
lau
rie
C
nc
op
ap
h
pr
ita
th
a
l
e
s
F
und. The Ne
at, he wa
macro offering
w York-based
and before th
made its
global
debut last mo
You Read It Here First!
million.
nth with $200
To Subscribe Call 212 224 3570 (USA), + 44 20 7779 8999 (UK),
EMAIL: [email protected]
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
ain030909
5/3/09
19:32
Page 9
March 9, 2009
www.totalalternatives.com
Alternative Investment News
Europe
Green Goes Brown
Zurich Firm Shutters Two Funds
A pair of environmental offerings proved to be duds for Zurichbased Systematic Absolute Return SAR and the firm will focus
on its SAR Asset Finance Fund, which specializes in asset-based
lending. The firm has shut down the SAR Environmental Fund
after less than a year and the SAR Four Seasons Segregated
Portfolio, which lasted less than a month.
In both cases, the seed investors pulled out. A European
multi-family office yanked its $10 million from the
Environmental fund in October due to poor performance—the
fund dropped 17.6% in its first nine months—and the sole
investor for the Four Seasons fund pulled out its $1 million, also
in October, Andrew Perry, head of business development, told
AIN. He declined to name the investors.
Despite turbulent markets, the firm still sees plenty of
opportunities in the environmental space, and will consider relaunching the Environmental fund of funds in six months. “We still
have hope for that strategy,” Perry said. “It was just unfortunate the
seed investor pulled out.” It invested in managers focused on
renewable energy, clean technology, carbon emissions and water.
The firm has no plans to re-launch the Four Seasons fund.
SAR Asset Finance Fund invests in asset-based lending, assetbased investing and PIPEs managers. Last year the fund was down
11.5%. This year through Feb. 27, it is down 3%. Due to several
redemption requests, the firm is de-leveraging the fund, Perry
said. He declined to quantify the redemptions. The fund has $90
million in assets. Arne Schmidt co-founded SAR in 2001.
Veritas Hires Institutional Chief
Veritas Asset Management has hired Antony Burgess as director
of institutional business, where he will focus on pushing the
firm’s global and Asia-focused hedge funds to its U.K. and
European clients.
The London-based firm has seen institutional clients such as
charities and pension funds grow their exposure to alternative
assets lately, Richard Meyrick, director and head of sales, told AIN.
“The U.K. sector was the bread-and-butter for charities, but
now they are looking further afield because of the banking
problems,” Meyrick said. “The opportunities offered [by the
$100 million Veritas Global Income Fund] are much more
attractive for charities.” On the pension side, meanwhile, there
are large schemes—many in deficit—looking at different ways to
achieve investment goals, and Meyrick said the comparative
success of Asian economies is persuasive.
The firm has two Asian funds, run by Ezra Sun, fund
manager: the $410 million Veritas Asia Fund (Long Only),
which covers Asia excluding Japan, and the $95 million
Veritas Real Return Fund which includes Japan. Meyrick
said Burgess will be at the core of the drive. “Our
institutional accounts have been increasing their exposure to
alternatives, looking at the due diligence a bit more and
looking at some of the funds in the space, and we believe
Asia is a long-term opportunity.”
Burgess was previously at Capital International as vicepresident, relationship manager.
Former Putnam Chief Enters
Third-Party Marketing
David Puddle, former director of institutional
clients at Putnam Investments, has started his
own third-party marketing and manager
consultancy business, Durlstone Partners.
The firm is based in Tunbridge Wells, Kent.
Puddle will target hedge funds and other
alternatives firms as clients, but will also
David Puddle
work with traditional asset managers. He
observed that third-party marketing is a well-established service
for hedge funds, but less so in European institutional markets.
“Given the current market conditions, my timing could not be
more interesting, as I believe opportunities abound,” he said.
The financial landscape has changed dramatically over
recent months, he said. “Many businesses have found
themselves in a position where their hiring plans and staffing
levels are being affected by market events.” He added that
spending plans are being reined in and expansion ambitions
are being put on the backburner.
But, for some, recent events mark an opportunity to grow
their market share as others falter. Many investors will be
reviewing their strategy and their roster of managers, Puddle said.
After a relatively quiet year, 2009 and 2010 “could be
extraordinarily busy and successful years for investment
businesses that have the right investment strategies, well-regarded
teams and strong performance.”
Puddle has already negotiated contracts with a small number
of carefully-selected investors, but declined to provide details.
Durlstone will distribute existing investment strategies directly
and via intermediaries. It will also handle first-time entry into the
institutional market and advise on new investment strategies.
Having spent 15 years at Putnam, Puddle left the firm in
autumn 2007 with another 75 staff as parent company Marsh &
McLennan sold Putnam to Power Financial Corp.
To receive email alerts or online access, call 800-715-9195.
9
ain030909
5/3/09
19:32
Page 10
Alternative Investment News
www.totalalternatives.com
March 9, 2009
Europe (cont’d)
Estonian Shop Eyes April
For Delayed Launch
Arkanar Financial will launch its Arkanar Global Macro fund
on April 1. The fund has taken longer to launch than expected,
having originally been set for a September rollout. The
Estonian startup—created last year as a management buyout by
staff at Camelot Global Investment—applied the brakes after
its seed investor, a wealthy German family, pulled out
(totalalternatives.com, Jan. 5).
Initial backing is coming from families and high-net-worth
individuals, but Thomas Feldt, head trader, said the firm will seek
to hook up with some funds of funds soon after. “Usually funds of
funds require a couple months [of the fund being] up and
running—it’s hard to have them as seed investors,” he said. The
fund will launch with a minimum of $10 million, and will have a
potential capacity of $1 billion. Arkanar is charging fees of 2/20.
Feldt said the firm has run a conservative approach to
trading in its managed accounts, and the macro fund will
follow a “common sense” approach. Last November, the firm
shorted Italian and Spanish government bonds and went long
on German bunds. He said that Italy has outstanding debt of
more than 100% of GDP, and that the Italian government
would find it tough to get funding for any stimulus package. As
for Spain, Malaga-based Feldt added: “Just looking out the
windows, there are ‘for sale’ signs on everything, with prices
dropping incredibly.”
Germany Experts Open London Shop
Three specialists in German investing have set up Berger
Lahnstein Middelhoff & Partners in London, with plans to
launch a range of alternative strategies. The firm will begin
by deploying capital for Germany 1, the first German specialpurpose acquisition company (SPAC), for which it has raised
€250 million.
Exactly what other funds will be launched remains unclear.
Jeff Casper, head of investor relations, said BLM will not
commit to one approach. “The capital we do have is
sufficiently flexible that we don’t have to peg ourselves to [any
one strategy] right now. Once there’s clarity, we will do that.”
The firm has been set up by Florian Lahnstein, ex-head of
European investment banking at Bear Stearns, Thomas
Middelhoff, ex-ceo of German retail holding company
Arcandor, and Roland Berger,a former management consultant.
BLM is still deciding how to invest the capital raised for
Germany 1. It sees opportunities in the troubled European
10
securitization markets and also aims to deploy capital into asset
classes it understands. Casper said BLM already has a number
of strategic investors and the early client base will comprise
mostly high-net-worth individuals. The firm will then target
family offices and other investors further down the line.
Converts Manager In A Quandary
INTL Consilium sees some interest returning to the
convertible bond sector but the manager of its primary fund
in that sector is concerned it may not gain traction. “We’ve
seen a bit of risk appetite coming back,” Portfolio Manager
Rory Passey wrote in a recent letter to investors. “[But] In
short, we would argue that a good proportion of the recent
rally has been speculative and this worries us slightly.”
“It’s quite interesting,” Passey told AIN in a follow-up call.
“There are an enormous number of corporate credits out
there that appear to offer tremendous value. They also
contain imponderable binary risks in them. The
opportunities are reasonably difficult to assess […] The broad
economic situation is very, very serious. No doubt about
that,” he added.
The ICL Convertible Arbitrage Fund, which uses both
equity and credit derivatives, cash bonds and credit-default
swaps, was up 1.30% in January. Last year, it returned
1.33%. Half of its portfolio is invested in the U.S. and half
in Europe. Passay manages the fund in London.
Despite the difficult environment, the fund nonetheless
hopes to raise assets to $250 million from $24 million in the
next nine-to-ten months, Passey said. Michael Berry and
John Tacchi are heading up the fundraising efforts in the
U.S. and Europe, respectively.
The firm, which has $600 million in total assets, also
manages several emerging markets strategies.
NOW GET alternative investment news
EVERY FRIDAY!
Paid subscribers now have access to a PDF of the upcoming
Monday’s newsletter on AIN’s Web site every Friday
afternoon before 5 p.m. EDT. That’s a 64 hour jump on mail
delivery, even when the post office is on time! Read the
news online at your desk or print out a copy to read at your
leisure over the weekend. Either way, you’ll be getting our
breaking news even sooner and starting your week off fully
informed!
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
ain030909
5/3/09
19:32
Page 11
March 9, 2009
www.totalalternatives.com
Alternative Investment News
Europe (cont’d)
Harcourt-Linked Marketer
Seeks Funds
Polaris Investment Advisory, the third-party marketing firm cofounded last year by Harcourt Investment Consulting, is looking
to add three funds to its platform. In terms of single-manager
hedge funds, the firm is seeking a volatility arbitrage manager and
a trend-following CTA. It also wants to add a
systematic-trading-oriented multi-manager
fund. Polaris promotes and distributes a
handful of hedge funds in Continental Europe,
with a focus on German-speaking markets.
Claus Hilpold, founding partner and
Harcourt’s former head of business
Claus Hilpold
development for Germany and Austria, told
AIN the three strategies are being added for several reasons.
The firm has seen investor demand for these strategies, and all
three are inherently liquid and transparent, he explained. In
addition, all three have a high chance of receiving European
onshore authorisation via Ucits III because they rely on futures
and options, which are generally accepted and accommodated
by the directive, he added.
Polaris is building out a select range of funds for which it
will provide marketing and business development services in
Europe. It will work only with one manager within each hedge
fund strategy type, in order to remain focused and avoid any
conflict of interest. It seeks managers with a track record of at
least a year, and a minimum of $50 million under
management. The firm already markets a currency manager, a
commodities strategy and a power fund.
Asia Pacific
Asia Firm Debuts CTA
Fund Of Funds
Hong Kong-based Ajia Partners launched a new fund of funds
last week. The Explorers Fund will invest in a basket of
commodity trading advisors playing currencies, commodities or
equities—or a combination of these—via options, swaps and
futures. Christina Chung, marketing manager, said around
eight-to-12 CTA managers will be targeted.
The firm will use a risk overlay strategy incorporating overthe-counter flow products like put options to manage its related
exposures. This will help Ajia mitigate the correlation risk
between asset classes in which the CTAs are involved. “Many of
these individual CTA managers do not have hard stop-losses,
especially longer time-horizon traders; they let their models
play out,” said Chung. “Our risk overlay gives us the ability to
select, monitor and cut positions when necessary, hence […]
lower volatility.”
The increasing use of OTC products in this way may spur
banks acting as brokers in the region. “If you are using OTCs in
the format of a fund, investors will be prepared to buy into it,”
said one head of fund derivatives in Hong Kong. “Banks will be
targeting these types of funds in order to act as a broker/advisor
for these products.”
The Explorers Fund offers daily liquidity and is geared
towards attracting institutional investors.
Short Takes
Short Takes features stories from other news sources and firm announcements. AIN does not guarantee the completeness or accuracy of stories gleaned from other sources, though they are believed to be reliable.
Dow Seeks PE Investors
TPG Offers Chap 11 Financing
Dow Chemical is negotiating with a group of private equity
firms about investing in its agricultural-sciences unit. The
private equity firms include The Blackstone Group and
Kohlberg Kravis Roberts. (Reuters)
Private equity firm TPG is offering bankruptcy financing for
its aluminum products maker Aleris. The deal, if successful,
would help TPG recover some of its investment in the firm,
which filed for protection last month. (Financial Times)
Weston Capital CIO Resigns
Nigerian Government To Start AM Firm
Weston Capital Asset Management’s CIO Matthew Hoffman
has resigned. His duties have been taken up by others on the
firm’s investment team, and he will not be immediately
replaced. (Pensions & Investments Online)
Nigeria’s government plans to create an asset management
company. Central Bank of Nigeria officials are mulling the
move as part of contingency plans to tackle the financial
crisis. (Bloomberg)
To receive email alerts or online access, call 800-715-9195.
11
ain030909
5/3/09
19:32
Page 12
Alternative Investment News
www.totalalternatives.com
March 9, 2009
Short Takes
Gleacher Forms Special Situations Team
Blackstone Writes Down Deutsche Bank Debt
London-based corporate finance advisory firm Gleacher
Shacklock is forming a special situations team, to tap
opportunities from restructuring failing companies’ finances.
Lawyer Dorian Lowell will manage the practice. (Financial Times)
Blackstone has written down the value of several billion dollars
of debt that it bought at a discount from Deutsche Bank in
April to zero. The debt was mainly issued to help private
equity shops pay for large listed companies. (Financial Times)
Blackstone Hires French Ambassador
Infrastructure India Bids For Bloomsbury Asset
Blackstone has appointed Gérard Errera as a special advisor to
focus on business development and transaction opportunities for
the firm in France and Europe. Errera was previously Secretary
General of the French Ministry of Foreign Affairs. (AltAssets)
Infrastructure India, a London-based investment firm, is
seeking shareholder approval to buy its investment advisory
firm, Bloomsbury Asset Management Advisors for £2 million.
(VCCircle)
Data Zone
PERFORMANCE SNAPSHOT: FIXED-INCOME HEDGE FUNDS
The table below displays some of this year’s top performing fixed-income hedge funds, according to data
provided by Eurekahedge.
Fund
Eurekahedge Fixed Income Hedge Fund Index
Fixed Income
Goldstein Capital Managed Bond Portfolio
Capital Structure Opportunities Fund
JB Global Rates Hedge Fund
GCA Credit Opportunities Master Fund
Singleterry Mortgage Fund
PENN Core High Yield Bond Fund
The Asgard Fixed Income Fund
Midway Market Neutral Fund
III Relative Value/Macro Fund
Arrow High Yield Fund
GEMS Bond Fund
Compass Income Fund
LGIM High Yield Alpha Fund
III Relative Value Credit Strategies Fund
BBM High Yield 1 FIM
Lynx Fund I (Master Fund)
Nexstar Developing Opportunities Fund
Cura Fixed Income Arbitrage Fund
Thames River Hillside Apex Fund
Renaissance Russia Debt Fund
Regional Fixed Income IndicesEurekahedge
North America Fixed Income Hedge Fund Index
Eurekahedge Europe Fixed Income Hedge Fund Index
Eurekahedge Emerging Markets
Fixed Income Hedge Fund Index
Manager
Jan. ‘09
Return
2008
Return
2007
Return
Annualised
Std. Deviation
Sharpe
Ratio
0.86
-13.34
6.17
4.22
0.88
North America
North America
Global
North America
North America
North America
Europe
9.06
8.38
7.55
6.58
5.83
5.77
5.60
-8.80
-39.47
9.96
13.02
-1.28
-16.58
-3.98
-3.22
-6.04
14.44
4.91
1.33
3.18
6.68
16.37
8.02
7.05
21.66
7.92
5.96
0.44
0.17
0.84
10.03
0.52
0.12
-0.12
18
12
141
16
Not Disclosed
79
171
North America
Global
Global
Emerging Markets
Latin America
Global
5.00
4.65
3.40
3.39
2.94
2.81
-13.50
-62.95
-3.76
-36.72
-18.89
-6.14
20.05
15.75
0.61
10.21
5.56
-4.46
9.28
21.20
5.45
11.89
12.31
6.91
0.81
-0.57
0.98
-0.20
-0.43
-0.52
Not Disclosed
186
143
15
26
36
North America
Brazil
North America
Emerging Markets
Global
Emerging Markets
Eastern Europe
& Russia
2.65
2.61
2.54
2.50
2.36
2.00
1.85
-31.26
9.56
18.62
-19.57
6.57
-35.03
-21.87
18.40
8.34
7.48
5.93
15.53
10.32
12.32
11.45
12.50
2.82
10.59
12.10
11.37
11.47
-0.60
1.61
2.18
0.09
0.43
0.30
-0.34
543
32
218
89
Not Disclosed
422
31
3.27
-11.12
8.77
4.16
1.29
-0.20
0.62
-21.21
-16.67
3.36
8.62
10.83
5.88
0.03
1.38
Region
Goldstein Capital Corp
PENN Capital Management Company
Baer Select Management
Global Credit Advisers
Singleterry & Company
PENN Capital Management Company
Nordic Asset Management
Fondsmaeglerselskab A/S
The Midway Group
James River Capital Corp
Arrow Hedge
FPP Fund Management
Compass Group
Legal & General
Investment Management
James River Capital Corp
BBM Gestão de Recursos
Proprietary Capital
Nexstar Capital Partners
Cura Capital Management
Thames River Capital
Renaissance Investment
Management
AuM
(US$ Million)
Notes:
* Ranked by Jan-09 Return
Eurekahedge Commentary
Fixed income managers had a good start to the year, with the Eurekahedge Fixed Income Hedge Fund Index up 0.9% in January. This performance was delivered against the backdrop of falling
government bond-prices across the board, and a corresponding upturn in the high yield market in January; yield on the US-30-year T-note rose nearly 90bps, while in the high yield space the
Merrill Lynch Global High Yield Index rose 5.6% during the month.
In terms of regional investment mandates, North America (3.3%) fared the best, as a number of managers benefited from, among other things, shorting US Treasuries during the month. Emerging
market investing funds returned 0.6% on average, with a large portion of the gains coming from allocations to the Latin American fixed income and currency markets. Sharp declines in Eastern European
currencies, however, offset some gains; this, to some extent, is also reflected in the return of the Eurekahedge European Fixed Income Hedge Fund Index, which finished the month down 0.2%.
12
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
ain030909
5/3/09
19:32
Page 13
March 9, 2009
www.totalalternatives.com
Alternative Investment News
Alternatives Manager Search Directory
Powered by:
i i s e a r c h e s . c o m
The following directory includes search 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.
Total
Assets
Mandate
Size
Mandate
Region
Asset
Type
Consultant
Adelphi University, Garden City, NY
78
4
US
Not specified
Hewitt Associates
The endowment will consider diversifying its portfolio by increasing
alternatives. It has not targeted a specific strategy, but plans to
commit an additional 5% of its assets to the asset class. A decision
may be made after its May board meeting.
Bank of Ireland Staff Pension Fund,
Dublin
4,000
-
Global
Private equity,
hedge funds
Watson Wyatt
The scheme is eyeing new alternative investments to increase
diversification. The scheme is eyeing private equity through fund of
funds and specialist managers, and is also looking at funds of hedge
funds. It has set no specifics on the size and funding of the potential
mandates and will allocate as soon as the market stabilises.
Brockton (Mass.) Contributory
Retirement System
264
-
US
Timberland
NEPC
The scheme may make a foray into timber, based on the results of
an ongoing asset study. A timeframe for its decision has not been
established.
Channel Tunnel Group Pension Fund,
Kent, UK
120
-
Global
Not decided
Stamford Associates
The scheme is analysing various alternative asset classes for a first
move. The £85 million fund will make final decisions following its
ongoing investment strategy review.
2,900
-
Global
Tactical asset allocation
Ennis Knupp +
Associates
The fund is considering a foray into global tactical asset allocation
strategies with a 2% target allocation. It plans to issue a request for
proposals in April.
Community Foundation of the United .
Jewish Federation of San Diego, Calif
250
-
US
Commodities
Wurts & Associates
The foundation is analyzing commodities and may consider an
investment. Should approval be granted it might allocate up to 5%
for the move.
Dans St. Psf. Voor de, The Netherlands
63
-
Unknown
Infrastructure, others
Lane Clark & Peacock
The scheme will consider alternatives including infrastructure by the
end of this year, following its ongoing asset-liability matching study.
It will invest 5%-10% of assets in alternatives and hire a manager
for the move if it decides to go ahead. The final decision is subject
to approval by its investment committee.
Hanson Building Materials North
America, Dallas, Texas
1,790
95
US
Hedge funds
NEPC
The fund is planning a maiden foray into hedge funds. It expects to
invest up to 5% of its total assets and may seek a manager upon
approval. A timeframe for its decision has not been established.
Lancashire County Council
Pension Fund
4,525
113.14
Unknown
Infrastructure
Mercer
The scheme is considering investing 4% of the assets, or around
£80 million, in infrastructure as part of its strategy to diversify its
investments and to secure comparatively stable long-term returns.
Milwaukee County Employees’
Retirement System
1,120
-
US
Hedge funds
Marquette Associates
Oakland Police & Fire Retirement
System, Oakland, Calif.
300
-
US
Not decided
Pension Consulting
Alliance
The fund has received an educational presentation on alternatives.
Its plans are in the early stages.
RGK Foundation, Austin, Texas
120
-
US
Hedge funds
Presidio Investments
The foundation is considering hiring two hedge fund managers. It
has placed four managers on watch for unspecified reasons. A
replacement search would be conducted through Presidio.
Sportfondsen Psf., St., The Netherlands
140
-
Unknown
Commodities
Mercer
The scheme may invest in commodities by the end of this year. At
this point it intends to use its incumbent firms for the move.
4,100
-
Unknown
Commodities, infrastructure
Unknown
The scheme plans to invest more in commodities, and to allocate to
infrastructure. The commodities move is being initiated as the
scheme believes it is a more interesting asset class than before. It
also sees good opportunities to profit from infrastructure
investments in the current financial climate, as governments are
trying to stimulate the economy.
-
-
US
Venture capital
None
The fund has issued a request for proposals seeking managers to run
up to five funds to make early-stage investments in startup
companies in New York. All proposals are due by April 3, 2009.
Merimieselakekassa, Helsinki
620
-
Global
Infrastructure
None
The scheme plans to raise its investment in infrastructure to 12%
from 9% this year through infrastructure mutual funds. The funding
for the initiative will be arranged by trimming down its real estate
exposure to 30% from the existing 39%.
Printpack Europe Pension Scheme,
Lancashire
70
-
Global
Hedge funds
Buck Consultants
The scheme is considering investing in hedge funds this year on the
recommendations of its consultant and trustees. It was mulling
investments last year but postponed for undisclosed reasons. It has
set no specifics on the size, funding or timeframe of the potential
mandate, but may hire additional managers.
Fund & Location
Chicago Policemen’s Annuity &
Benefit Fund
VBV Pensionskasse, Vienna
New York City Economic Development
Corporation, New York
Comments
The system is considering diversifying its alternatives portfolio and
may consider hedge funds. It recently received an educational
presentation on the asset class. A timeframe for its decision has not
been set yet.
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].
To receive email alerts or online access, call 800-715-9195.
13
ain030909
5/3/09
19:32
Page 14
Alternative Investment News
www.totalalternatives.com
Mandate Scoreboard
March 9, 2009
Powered by:
i i s e a r c h e s . c o m
The table below shows new allocation commitments gained by alternative managers year-to-date through March 4. The 2008 and 2007
columns denote the last two years’ rankings. Wins represent the number of new mandates the firm has won this year.
2009 Tally
Rank
1
2
3
4
5
2008
2007
10
241
233
7
8
29
141
10
11
12
22
48
60
80
12
165
198
6
3
14
15
16
20
22
26
27
28
30
31
32
16
241
265
34
59
105
142
110
37
38
174
267
395
11
40
48
52
53
56
57
58
14
265
43
86
84
36
72
11
19
Firms Hired
Wins
Hellman & Friedman
3
Fisher Lynch Capital
1
Parish Capital Advisors
1
Franklin Templeton Investments
1
Bank Of America
1
Khosla Ventures
1
Charterhouse Capital Partners
3
K2 Advisors
1
Rock Creek Group
1
Ares Management
2
Alterna Capital
1
OFI Institutional Asset Management
1
Schroder Investment Management
1
Castle Creek Capital Partners
1
TriAlpha Investment Management
1
Adams Street Partners
1
Alinda Capital Partners
1
Bay Hills Capital
1
Citi Alternative Investments
1
CVC Capital Partners
1
VSS Structured Capital Partners
1
China New Enterprise Management
1
NGP Energy Capital Management
1
Odyssey Investment Partners
1
Regiment Capital
1
Industry Funds Management
1
First Reserve Corporation
2
Camden Partners
1
Conservation Forestry
1
Mayfair Capital Investment Management
1
HarbourVest Partners
2
Babcock & Brown
1
Cadogan Management
1
Macquarie Group
1
Permal Group
1
Reiten & Co. Capital Partners
1
AMP Capital Investors
1
LBO France
1
Oaktree Capital Management
1
Bain Capital, Inc
1
Caspian Capital Partners
1
Catalyst Microfinance
1
FirstRand Alternative Investment Management (FRAIM)
1
HealthCor Management
1
Karsch Capital Management
1
Miura Global Management
1
New Enterprise Associates
1
Capvis Equity Partners
1
Change Capital Partners
1
Investindustrial Advisors
1
Redesign Partners
1
Partners Group
2
Abbott Capital Management
1
ABN AMRO
1
Sail Venture Partners
1
Segulah
1
BlackRock
2
Fairfield Greenwich Group
1
Jupiter Asset Management
1
MicroVest
1
Visium Capital Management
1
Total*
630
500
350
300
200
200
100
100
100
74
70
65
65
60
59
50
50
50
50
40
40
30
30
30
30
28
25
25
25
21
20
20
20
20
20
20
18
16
16
15
15
15
15
15
15
15
15
13
13
13
13
10
10
10
10
8
7
7
7
7
7
Client
Asset Type
New York State Common Retirement Fund
Opportunistic real estate
Royal County of Berkshire Pension Fund
Real estate
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.
Amount*
300
21
ain030909
5/3/09
19:32
Page 15
March 9, 2009
www.totalalternatives.com
Alternative Investment News
Wins
1
Total*
6
Asset Type
2
1
1
3
2
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
5
5
3
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Mandate Scoreboard (cont’d)
Rank
62
63
64
65
66
67
2008
2007
118
395
10
9
5
99
84
395
178
70
117
141
9
Firms Hired
Brevan Howard Asset Management
Great Hill Partners
HitecVision
Triodos Bank
Emerald Technology Ventures
Blackstone Alternative Asset Management
Credit Suisse
The Riverside Company
Apex France
Apollo Capital Management
Arden Asset Management
Brazos Private Equity Partners
Capital Dynamics
Dorchester Capital Advisors
Dover Street
ECI Partners
Goldman Sachs Asset Management
Harris Alternatives Investment Management
HgCapital
King Street Capital
Liongate Capital Management
Longitude Capital Management
Pantheon Ventures
PIMCO
Quantum Energy Partners
TCW Group
TowerBrook Capital Partners
TPG Partners
Triton Capital Management
Wind Point Partners
Xafinity Paymaster
Client
Amount*
*in USD millions
For a complete listing of the Mandate Scoreboard, please visit www.totalalternatives.com
BREVAN HOWARD
(continued from page 1)
component. “We’ll be offering something without beta—there’s
no imbedded duration or credit premium in what we do,” said
Patton, who joined Brevan Howard as part of a five-man interest
rate team from Aberdeen Asset Management.
The portfolio consists primarily of short-duration securities
from the major liquid markets—the U.S., Europe, U.K. and
Japan—with active interest rate and currency strategies
implemented using government bonds and liquid derivatives. In
line with its target investors’ return parameters, the fund will seek
to make a relatively conservative 3.5% annual return, net over
cash, with volatility around 5%. JPMorgan will distribute the
fund globally, and Patton said he sees no capacity issues up to at
least $5 billion; if the strategy reached $10 billion, the firm
would look to shut the fund.
The fixed-income strategy is the only planned Ucits fund
that is not being spun out of the Master Fund. Patton said
this is partly because the firm wanted to “hand-pick” a team
with experience of running a Ucits-compliant fund. The
subsequent rollouts will be run by existing Brevan Howard
teams. The foreign exchange strategy is being run internally
and will be next to launch, with a target return of 10%. Patton
said it was too early to provide details on the long/short equity
and emerging markets funds. All three are expected to have
launched by early next year.
“Ucits is all about having more transparency,” said Patton.
“We’re able to have daily liquidity [and] it’s very much an
institutional-type product.”
Brevan Howard is just the latest big firm to acknowledge
investor demand for funds that comply with the Ucits
directive, which is beneficial to managers because it enables
funds to be marketed throughout the European Union while
only being authorised by one member state. Gartmore, New
Star Asset Management, Deutsche Bank, Robeco and
Barclays Capital are among the firms known to be moving
towards a Ucits III structure for distributing their hedge fund
strategies.
—R.M.
To receive email alerts or online access, call 800-715-9195.
15
ain030909
5/3/09
19:32
Page 16
Alternative Investment News
www.totalalternatives.com
CASTLE ARCH
(continued from page 1)
of mortgages or buying up vacant properties directly.
The idea for the fund, named Castle-Arch Lease-To-Own
Income Fund, took root 10 months ago when Castle Arch
formed a partnership with HYCA, a specialist in the lease-toown industry. Ed DeShields, president of HYCA, said that
the partners are projecting 10% annual returns. The fee
structure is still being worked out but the fund has no
management fee. The partners are hoping to raise $25 million
for the first closing.
Loan-to-own strategies are also coming to the fore. That’s
where a firm buys debt of a company with the intention of
later converting to a majority equity stake. “It’s a safer way to
get in,” said Russell Greenberg, founder and managing partner
of private equity firm Altus Capital Partners.
Greenberg said Altus would be getting into this strategy if it
had enough capital. Instead, it is focusing on its underlying
portfolio companies. Greenberg has heard of private equity
firms, mezzanine debt funds and hedge funds all eager to put
capital into this space because banks and other hedge funds are
desperate to unload such debt from their balance sheets.
—Corrie Driebusch
ROCKLEDGE ENTERS
(continued from page 1)
another $20 million once it launches, Gurvich told AIN.
The firm runs a long-only fund and made its first move into
shorting last year when it began to run a managed account
based on the sector-rotation strategy. Spanish firm Welzia
Management partnered with Rockledge to roll out the Sector
Alpha Europe fund with €500,000.
Both funds will use nine quantitative systems to trade across
nine equity sectors. The U.S. fund will trade the S&P 500,
while the European version will trade the Dow Jones Stoxx 600.
Dimanshteyn spent 12 years designing the quant systems,
which will analyze financial statements from every company on
the index. While there are other sector-rotator funds in the
industry, Gurvich is unaware of any that use such a system.
“That’s part of our secret sauce,” he said.
Picking the right sector is more efficient than stockpicking, he added. “When you stock-pick, you have a lot of
individual company risk. You’re not diversified,” he said.
“When you invest in sectors, you’re taking a larger bet on
the health of the economy […] and sectors by default are
diversified.” The fund will invest primarily in ETFs, but
individual stocks and futures can be used as well, he added.
The managed account has been running since last July and
16
March 9, 2009
returned 8.53% through December. This year through Feb.
27, it’s up 1.70%.
Before co-founding Rockledge, Gurvich managed a $120
million private equity portfolio at GE Capital, and
Dimanshteyn was a quantitative portfolio manager at Cigna
Investments, managing over $200 million.
—Suzy Kenly
GLG KICK-STARTS
(continued from page 1)
with volatility of 15-20%.
The fund will be Cayman-domiciled. It will charge a 2%
management fee and 20% incentive fee, with a high-water mark.
According to the document, the fund would be reviewed if it
incurred a loss of 10%, and full liquidation would be considered
after a 20% loss. The fund will not employ a lockup and will
have monthly subscriptions and redemptions.
GLG managed $15 billion as at Dec. 31, and had 304
employees. Talia Druker, a spokeswoman for the firm in
London, had no comment by press time.
—Robert Murray
Quote Of The Week
“[Institutional investors] are the big boys and what they want in
this current situation are the [funds] who can deliver positive
returns.”—Christen Thomson of the Alternative Investment
Management Association, on big investors switching to hedge funds
from long-only strategies (see story, page 2).
One Year Ago In Alternative Investment News
Ex-Soros Fund Management Senior Analyst William Seibold
co-founded Noroton Capital Management with plans to launch
the Noroton Event-Driven Opportunity Fund…Mercer was
looking to offer alternative investments to North American
clients as part of its manager-of-managers platform…Credit
Suisse Asset Management prepared to launch an emerging
market debt hedge fund.
For More Benefits Visit Our Web Site
• Real time search alerts and breaking news on the alternative investment arena
• Email alert services for earlier delivery of information in the weekly newsletter
• Access to a virtual archive of past issues
• Critical web links to related sites to give you all the information you need on
alternative investments
Go online and take advantage of web access to AIN.
To set up your subscriber password, please contact us at
[email protected] or at 1-800-715-9195.
©Institutional Investor News 2009. Reproduction requires publisher’s prior permission.