Hedge - Optima

ISSN 1757-7381
ISSUE . 32
£5
DIXON
BOARDMAN
Why the hedge guru is still smiling
I N D U S T RY • L U X U RY • O P I N I O N
Editorial
EDITOR
Mark Hedley
DEPUTY EDITOR
E DI TOR'S
L ET T E R
Jon Hawkins
FEATURES EDITOR
Cathy Adams
SUB EDITORS
Chris Borg, Helen Nianias
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Michael Gibson
Design
ART DIRECTOR
Matthew Hasteley
DEPUTY ART DIRECTOR
Lucy Phillips
DESIGNER
Abi Robinson
JUNIOR DESIGNER
Bianca Stewart
DESIGN ASSISTANT
Avril McDermott
Contributors
Simon Barr
Simon De Burton
Christopher Dennistoun
Jessica Furseth
Laura Millar
Ian Morley
Robin Swithinbank
Nicki Whittaker
Advertising
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Michael Berrett,
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Will Preston
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D
ixon Boardman knows people. He
has forged a hugely successful career
from his uncanny knack of spotting
– and duly backing – a winner.
If Warren Buffett is the sage of stock selection,
then Boardman is the prophet of people picking.
Paul Tudor Jones, Bruce Kovner, Louis
Bacon, Alan Howard – all legends of the fund
management world, and all managers who have
benefitted from the backing of Boardman.
He’s also refreshingly honest about the
industry. He once said: “The smartest money
managers in the world run hedge funds. Why?
Why do people rob banks? That’s where the
money is. The fees are greater.” Having built
Optima Fund Management to $4.4bn assets under
management, it’s difficult to argue with the man.
Not that you’d have any reason to, as he is one
of the industry’s old-school charmers. He prides
himself on knowing people, not just portfolios.
As he explains to Jessica Furseth in our exclusive
interview [p42]: “To know someone really, really
well, to know what’s going on in their lives, means
you know when they’re focussed.”
In a world largely dominated by numbers men,
it’s heartening to know that you can still thrive as
a people person.
COMMERCIAL DIRECTOR
Mike Gluckman
LEAD DEVELOPER
AJ Cerqueti
MARKETING & PR
Krista Faist, Emily Buck
ACCOUNTS
Caroline Walker
FINANCIAL DIRECTOR
Mark Hedley - Editor
[email protected]
JESSICA FURSETH
A London-based
freelance journalist,
Jessica Furseth
specialises in business
start-up trends and
technology. Previously
funds editor at Shares
magazine, she regularly
covers investment and
market topics. In this
issue, she interviews
Dixon Boardman. [p42]
IAN MORLEY
Ian Morley is one of the
pioneers of the hedge
fund industry. Chairman
of Wentworth Hall
Consultancy, he is also
an acclaimed speaker
on the financial
conference circuit.
This issue, he serves
up his essential laws
of business and fund
management. [p28]
SIMON DE
BURTON
Simon de Burton is a
journalist and author
who writes about a
wide range of luxury
objects, from highend wristwatches to
bespoke motorcycles.
This issue, he looks
into the old and new
masters of the Mayfair
scene. [p56]
Steve Cole
CEO
Tim Slee
CHAIRMAN
Tom Kelly OBE
TINY COMPETITION: Find the Mayfair
door knocker hiding somewhere in the
magazine. Email us with your answers to
[email protected].
Terms & conditions apply.
△ Cover image by
David Harrison
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CHRISTOPHER
DENNISTOUN
Chris Dennistoun is a
specialist in literature
of speculation and the
stock market. In 2007,
his unique collection
of more than 750 titles
was sold to one of the
world’s most important
fund managers. He
writes on legend Jesse
Livermore. [p33]
3
HEDGE
F E AT U R E S
42
HEDGE
COVER STORY
DIXON BOARDMAN
For the Love of the Game
Even after a quarter of a century in the hedge fund world, Dixon Boardman’s enthusiasm for the
industry and ability to spot new talent are as strong as they ever were, says JESSICA FURSETH
LONDON MORNINGS ARE a reprieve
from Dixon Boardman’s busy schedule,
providing a few hours of unusual calm. “I
love being in Europe because the mornings
are free – everyone’s asleep in America,”
he says. “So I can get things done which
I wouldn’t normally be able to do.”
One of those things is sitting down with
this journalist, although Boardman would
never say that outright – the New Yorker
is far too polite. His reputation as a hedge
industry leader precedes him: the founder
and CEO of Optima Fund Management
has been in the thick of it for 26 years.
He knows everybody, and several of those
people describe him, without any irony, as
a ‘guru’. What my research hasn’t revealed,
though, is that this industry wizard is a
perfect gentleman with a knack for making
people feel at ease as he punctuates his
many anecdotes with laughter.
Our luxurious surroundings are those
of 5 Hertford Street, a private members’
club in Mayfair. You gain entry through
an unmarked door, making the place
unexpectedly difficult to find considering
the solid hint in its name. Of course, this
is an exclusive venue for a certain elite and
simplicity is not a requirement. Privacy,
however, certainly is – and that means the
photographer must wait outside.
Boardman is in a corner room in the
labyrinthine building, where paintings
and knick-knacks cover every wall and
shelf, the result being kooky but curiously
PHOTOGRAPHS by Daivd Harrison
It’s old-fashioned, but
I think to know someone
really, really well, to know
what’s going on in their
lives, means you know when
they’re focussed. But we
don’t always get it right
elegant. He is equally stylish, in a charcoal
suit with a magenta shirt and maroon tie,
tortoiseshell glasses in hand. He tells his
stories calmly and confidently – a man who
has plenty to say but nothing to prove.
A GOOD REPUTATION
Boardman normally comes to London
at least twice a year, visiting clients and
sometimes managers as well. “I try and
combine business with pleasure. I love it
over here,” he explains. This feeling goes
all the way back to his schooldays at Stowe,
which may be partially responsible for his
mid-Atlantic accent, with only the most
occasional of Americanisms slipping in.
Founded in 1988, Optima Fund
Management now has $4.4bn in assets
under management. The company advises
on multi-manager portfolios as well as
running its own single manager hedge fund
programme. Institutional investors make
up 70% of the client base, and Boardman is
known for playing a long game. “We’re risk
hypochondriacs. We are quality obsessed,
we know our way around the industry so
well,” he says. “I think that’s helped us very,
very much. We have a good reputation.”
What this also means is that Optima can
get access to funds that may be closed to
other investors. This is in part because its
good reputation is not just among clients
who enjoy the returns, but among managers
as well. “We’re beginning to see managers
who worked in some of the old funds start
their own new funds,” Boardman says.
“Having been doing it for so long, when
there’s someone good, we hear about it.
It’s awfully nice when [Tiger Management
founder] Julian Robertson picks up the
phone and says to me in a Southern drawl:
‘Dixon, I got this really good new guy you
got to come and meet!’ That’s terrific.”
Asked how he picks managers to invest
with, Boardman deems the question
“unanswerable”. But he tries: “Sometimes
you just know, when it’s such raw talent and
such incredible analytical skill. Having been
doing this for so long, maybe one has an
edge in being able to see it.
“Sometimes one watches them grow in
their old firm before they have started their
own firm, so that’s a huge advantage.”
Recommendations from the likes of
Robertson, or Chase Coleman of Tiger
Global Management, will of course be
an indicator that a new manager is worth
considering. “I have befriended many of the
managers we have money with. I’ve got to
know them well and see them socially, and
I know their children. It’s old-fashioned,
but I think to know someone really, really
well, to know what’s going on in their lives,
means you know when they’re focussed.
But let me tell you – we don’t always get it
right!” Boardman laughs, adding: “But we
get it right more often than wrong.”
THE BEST IDEAS
Still, Boardman’s experience as one of the
very first hedge fund company founders
means he has a keener eye than most.
“When we started in 1988, it wasn’t even
a cottage industry,” he says. “There were ▶
Dixon Declares…
Classic Boardman quotes
■ On spotting a good manager: “It’s a
sixth sense. You can smell it, you can
taste it. It’s the weirdest thing.”
■ On the three secrets of hedge fund
investing: “Don’t lose money, don’t lose
money and don’t lose money.”
■ On London’s role in the changing
financial world: “London is the centre
of the universe. There are a group of
people out there, from the Middle East,
Russia, some Europeans, people who
don’t want to come to America any
more. We don’t put out the welcome
mat for foreigners – but London does.”
43
HEDGE
COVER STORY
DIXON BOARDMAN
F E AT U R E S
▶ 600 hedge funds and only 100 of them
had more than $100m. Today, in some
regards, you could say it’s become the tail
wagging the dog, investment-wise.”
A commitment to innovation is arguably
a key factor in Optima’s success over
the years, as the company has – despite
its resistance to risk – presented fresh
investment ideas at times when few others
were doing anything like it. These ideas
PHOTOGRAPHS by David Howells/Corbis
The awful blow to the
whole investment industry
was the Madoff scandal.
If something seems too
good to be true, it usually
is. We have a whole set of
rules before we invest
include the Japan fund launched with
Platinum Asset Management founder Kerr
Neilson, and a healthcare fund with David
Chan of Jennison Associates, “a super
brilliant guy”. The award-winning Best
Ideas fund gave Boardman’s top managers
the chance to execute their number one
niche convictions. Now Optima has
established a fund of American farmland,
diversified across geographies and types
of crop: “Our plan is to actually take it
public,” he says. “People will be able to
invest in farmland instead of having that as
a different asset class, and not having the
disadvantage of it being illiquid. I really
think that’s an innovative idea.”
Asked whether his extensive experience
has left him immune to being surprised,
Boardman seems to think it has, but he is
quick to point to the position the hedge
industry is currently in. “The awful blow
to the whole investment industry was the
Madoff scandal – I would say we’re still
not fully recovered from that.”
He thinks about it for a moment. After
the scandal broke, people would ask him
how the business was doing, and he would
respond by telling them the funds’ gains.
“Then I thought to myself: ‘They probably
don’t believe me! They probably think I
made the number up!’” He cracks up. “It
changed the credibility of the industry.
Not to be boastful, but if something seems
too good to be true, it usually is. We have
a whole set of rules before we invest, and
it’s really not rocket science. One rule is
that we insist that whatever hedge fund
we’re investing with uses one of the top
accountants to do their audit.” Madoff’s
auditors, it emerged, were in a suburban
strip mall. “So yes, we knew him. Yes, we
looked at it. Yes, we were impressed with
the consistency of the claimed returns.
Did we invest? No, of course not.” ▶
45
HEDGE
COVER STORY
DIXON BOARDMAN
F E AT U R E S
“The trend towards
liquidity [in European
funds] has calmed down.
The best managers in the
world, by and large, don’t
offer instant liquidity. I’d
rather be with the best
▶ THE
BEST MANAGERS
In Europe, one of the consequences for
the hedge fund industry in the aftermath
of 2008 has been an increased focus on
transparency and liquidity. While expanded
transparency is “universally appealing” and
is happening across the board, Boardman
says, increased liquidity is an effect felt
more in Europe than in America.
He points out that the first hedge fund,
founded by AW Jones in 1949, only allowed
investors to get in and out once a year,
in part to prevent them from acting out
of greed and fear. “The Europeans have
never really liked that, but the American
institutions have accepted it pretty well,”
he says. “If anything, I would say the
trend towards liquidity [in European
funds] has calmed down a bit, and it might
be changing back to less liquidity.” He
considers for a while. “The best managers
in the world, by and large and with very
few exceptions, don’t offer instant liquidity.
I’d rather be with the best manager.”
While the office is under strict
instructions to interrupt his free time if
they ever need him, Boardman does take
spells away from work on occasion. “I visit
my wife’s family in the south of Spain every
summer. This year, a friend has a yacht
which we’re going to be on, cruising around
Majorca. That will be lovely, I’m looking
forward to that,” he says. “But two weeks is
max before I get itchy. I love what I do.”
Part of Boardman’s passion for his work
comes from the thrill of being surrounded
by “some of the smartest investment brains
in the world”. He is also involved in charity,
having donated a dormitory to Stowe, his
old school. Optima also has a philanthropic
foundation that benefits from part of the
fees on one of its funds. “It’s very nice to
give back,” he says. “But the real honest
answer: I just love my work. Love it.” H
46
HEDGE