9th Annual Midwest Benefit for Hedge Funds Care

HedgeCo News - Midwestern hedge fund managers and other alternative investment industry members will be meeting for the 9th Annual Midwest Open Your Heart to the Children Benefit on May 19th in Chicago, Illinois.

In support of Hedge Funds Care, a global non-profit organization that works to prevent and treat child abuse, the gala will be held at the new JW Marriot in Chicago (151 West Adams St., Chicago, IL) from 5:30pm until 10:00pm CST.

In addition to this year’s reception, there will be a ceremony held at 7:00pm followed by a high profile live auction featuring items such as the privilege of throwing a ceremonial pitch at Wrigley Field along with 4 box seats to the game and a once-in-a-lifetime trip to Paris in a luxurious Gulfstream 450 and a private apartment.

Additionally, The Kelly Lively Memorial Award, given in recognition of outstanding commitment to Hedge Funds Care and the prevention of child abuse and neglect, will be presented to Mesirow Advanced Strategies, Inc. The Co-chairs for the event are Amy Rosenow, Chief Operating Officer of Sheffield Asset Management, LLCand Jennifer Edgcomb, Vice President GEM Realty Capital, Inc. Attendees will include hedge fund investors, service providers and senior professionals, including some of the most recognized and respected investment managers in the industry.

“Thanks to the plentiful help and support of the Midwest alternative investment industry, the Chicago benefit is in its 9th and what we hope to be its most successful year. We call on our colleagues in the financial services industry to help us set a new annual fundraising record as every little bit can make a difference in the lives of these children,” said Jennifer Edgcomb, Vice President GEM Realty Capital, Inc.

“Hedge Funds Care has been steadfast in pursuing our vital mission since the charity was founded: working to raise and invest funds for best-of-breed programs to prevent and treat child abuse and neglect.” stated Amy Rosenow, Chief Operating Officer of Sheffield Asset Management, LLC. “It is wonderful that the hedge fund industry can work together to show the world the power of targeted philanthropy in helping these children who are so much in need.”

Since its inaugural grant-making cycle in 2003, the Midwest Chapter has made 121 grants totaling in excess of $4,200,000. The ongoing commitment of hedge fund industry professionals and investors, Hedge Funds Care looks forward to continuing to support existing grantees while also expanding support to new programs.

The Midwest Committee of Hearts is co-chaired by Ron Suber, Senior Partner of Merlin Securities, and Benji Wolken, Partner at Ernst & Young LLP.

Activist Hedge Fund Challenges Board At Fisher Communications

HedgeCo News - FrontFour Master Fund, Ltd., an affiliate of hedge fund investor FrontFour Capital Group LLC., has written a letter to the stockholders of Fisher Communications, Inc., criticizing the current board of directors and nominating new candidates. Fisher's stock has recently declined by 48%, representing a total stockholder loss of $173 million.

"FrontFour is compelled to run this election contest because after having one representative on the Board for two years, we were unable to get the Board to take the necessary steps to improve stockholder value." the activist hedge fund investor, who is also a long-term stockholder of Fisher, said in the letter, "We are seeking your support to elect highly qualified candidates to the Board of Directors of Fisher at its 2011 Annual Meeting of Stockholders."

FrontFour has nominated John F. Powers, Joseph J. Troy, Matthew Goldfarb and Stephen Loukas as qualified director candidates.

"If elected, our nominees will seek to have the Board carry out an operational and strategic analysis of all alternatives to maximize stockholder value, including ways to monetize Fisher Plaza." FrontFour concluded.

The Long Odds of an Acquittal for Raj Rajaratnam

HedgeCo News - After nearly seven weeks of testimony, the high-stakes insider trading trial of hedge fund manager Raj Rajaratnam has been handed to a federal jury in New York's Southern District.

Although there was no conclusion on the first day of deliberation, some are quick to tally the long odds of an acquittal for Rajaratnam, who faces serious prison time for the 14 criminal counts against him.

"This case has been an exceptionally strong prosecution - with wiretap evidence, including straightforward evidence of a defendant discussing trades based on insider information - and it has presented no technical elements that are beyond the grasp of a jury," former federal prosecutor and Congressman Artur Davis said. "A failure to convict or a muddled verdict like the one coming out the recent Barry Bonds steroids trial, would be a devastating blow to the prosecution."

Davis is now a partner in the white collar and government investigations practice at SNR Denton and a one-time member of the House Judiciary Committee.

A clear conviction, Davis believes, "will galvanize the government to duplicate the aggressive tactics used in the Galleon investigation. Investigations of high-dollar insider trading and other financial crimes will more and more resemble those in narcotics or public corruption cases, with wiretaps, extensive use of informants and even daring sting operations."

Davis acknowledges that the government's aggressive use of wiretap recordings - a tactic that is showing up in other Wall Street cases - may invite appellate scrutiny of electronic surveillance in insider trading cases. "In the Galleon example," he notes, "prosecutors got around the problem that the wiretap statute does not explicitly spell out securities fraud as a predicate crime by relying on case law that does allow wiretaps for general wire fraud cases. Still, the maneuver may draw closer attention from judges in future cases."

In broader context, Davis sounds a note of caution. "The Galleon investigation arguably tells us little about how judges and prosecutors are interpreting insider trading laws themselves," he notes. "For all the drama and publicity surrounding the trial, the legal basis of the Rajaratnam case is a garden variety claim that does not test novel or unlitigated theories of insider trading liability. That's a big contrast with, for instance, the Martha Stewart case, or other cases involving spousal sources of information and the definition of what constitutes confidential relationships under securities fraud laws."

Among the jurors are a former Israeli Defense Forces volunteer, a food services employee with the NY board of education, a city transportation agency worker, a graphic designer, an instructor for the blind, a retired bookkeeper and a nurse.

Manager Interview: Adrigo Hedge

Nordic Business Media - Adrigo Hedge, managed by Adrigo Asset Management AB, is a so called “Specialfond” according to the Swedish Act (2004:46) of Investment Funds and the Swedish Financial Supervisory Authority.

Interviewees: Göran Tornée och Håkan Filipson, Adrigo Asset Management

Introduction:
Adrigo Hedge started in December 2006 based on own money and investments from ‘friends and family’ with the idea to build a record to prove that its low risk stock picking strategy would work. After a successful start, Swedish industrialists Melker Schörling and Carl-Henric Svanberg, joined by investing into both the Fund Management company, Adrigo Asset Management (51% ownership) and the Fund.

The investment team and management, Göran Tornée (CIO and Fund Manager), Håkan Filipson (Man Director and Analyst) and Karl-Johan Bonnevier (Analyst) have all worked in the Nordic financial markets for leading banks and brokers for more than 20 years prior to setting up Adrigo Asset Management. The Fund, Adrigo Hedge, has returned 34% since its inception which compares with 11% for its benchmark, STIBOR, and -5% for the Nordic OMXN40 index.

Adrigo Hedge was recently nominated to Hedgefund of the Year 2010 by Swedish business magazine Privata Affärer.


Adrigo Hedge is a Nordic long/short equity fund – how do you go about the selection of your investments? Do you have fixed criteria?
We invest mainly into Nordic big and mid cap equities, both long and short positions. Our methodology is focussed on key elements like change (we need to see the trigger which should change the stock’s mispricing), alternative information (we search for additional information in unusual places, not just in management meetings) and we make a careful risk/reward calculation ahead of each investment. For example, we do not invest into biotech companies or exploration stocks where we cannot estimate the potential, or the risks. We meet or interact (conference calls, conferences, etc) with 150-200 companies each year.

Is the selection purely down to manager discretion or do you also use systematic elements?
The approach is very systematic but in the end our Fund Manager Göran Tornée decides which ideas go into the Fund, and when. Importantly, he handles the portfolio construction process which includes risk management by spreading bets over several sectors/themes and matching long and short exposures.

How do you decide when to enter and leave a winning/losing position?
We try to look at the portfolio every day with a fresh and open attitude, and not be influenced by whether it is a ‘winner’ or ‘loser’. Our investment decisions are always based on our stock picking methodology. This means that we need to see the value in a stock as well as the change factor which will unlock the value. In addition, we need to have done our homework by meeting the management and to have found some alternative information, for example; by interviewing unlisted competitors to the companies we invest into.

Can you give some examples of profitable and losing trades in the past.
We were early investors into Danish brewer Carlsberg which we bought in January 2009 after the shares had fallen by some 70% following the company’s ill timed purchase of Scottish & Newcastle. The acquisition left Carlsberg with too much Euro denominated debt at a time when its earnings power collapsed due to a dive in the Russian Rouble, which in turn was caused by the oil price crash. Our first purchases were made around DKK 180 and we have held the shares for much of the time, but not all, and seen the bulk of the appreciation to today’s DKK 580 level.

We see mistakes as a natural part of the investment business and we have plenty of losing trades each year. In percentage terms we held only a small position in Swedish directory company Eniro, but it turned out ill timed, with the stock losing 30% in a matter of days, albeit with only a minimal impact on the Fund.

Your chart would suggest a long bias. What was your typical and historic maximum of short exposure to the market?
Our net exposure to equity markets, measured as long exposure minus short exposure, in normal market conditions is around 20-50% and we have been mostly within those levels.

During the difficult time in the latter half of 2008, benchmarking to the equity index, you did relatively well. How did you get through that period – how were you positioned?
We are an absolute return fund, so we do not benchmark against a stock market index but rather against the Swedish interbank rate, STIBOR. In 2008 we saw a disappointing decline of 3,5% when our benchmark rose slightly. However, to place the decline in context, our Nordic markets fell by close to 50% in 2008 which was the worst stock market downturn in some 40 years. We think the 2008 experience proved that our investment philosophy worked well, both on stock picking and risk handling. At the time, our net exposure was lower, the long holdings were mainly in defensive companies (health care, telcos etc.) and the shorts were concentrated on high beta stocks, like industrials and financials.

Nonetheless your fund gave up almost 10% of its value from its 2007 peak. You do not claim to be totally unaffected by the stock markets, but how do you handle situations like that?
We know, and we can show, that there are always opportunities in stock picking, regardless of how the markets develop. While the market conditions were extreme in 2008, we remained confident in our methodology to select stocks, and we took the appropriate actions to reduce the market risks. At the worst point since the Fund was started it was down 0.9% for an original investor. However, the stock market’s worst point showed a decline of over 50%.

As a smaller manager, one could argue you are more exposed to manager risk, ie one of your key asset managers not being able or willing to continue work. How do you handle that?
All three members of our investment team are shareholders in Adrigo Asset Management and all have made substantial investments into the Fund. We work with something we love to work with, ie stock picking. Together with our main shareholders we have every intention of growing Adrigo to a leading player on a European scale. Our structure is set up to handle big money which we will do within a few years. As we grow, the manager risk will decline.

Any plans for the future, new products, new strategies?
We will continue to grow the company profitably in the coming years whilst adding shadow funds on Adrigo Hedge aimed at both domestic insurance platforms and more substantial international institutions. Our plans go beyond that, but we will not disclose the next steps just yet…

Interview by Kamran Ghalitschi
CEO of Nordic Business Media AB.

Hedge Fund Launches Up 34%

HedgeCo News - According to a new hedge fund industry study, Sizing The 2010 Hedge Fund Universe: A PerTrac Study, the single-manager hedge fund industry recovered in 2010 with assets under management (AUM) increasing 11% over 2009 to $1.6 trillion.

“As we look across the fund universe, one clear area of growth has been in the number of single-manager hedge funds, and we see that momentum continuing in the future,” Lisa Corvese, Managing Director at PerTrac said. “Overall, the study demonstrates a rebound — with the industry as a whole getting closer to prior peaks.”

1,184 new funds were launched, representing a 34% increase over the prior year. Total AUM for single-manager hedge funds and fund of funds was $2.1 trillion in 2010.

Fund of funds continue to see AUM decline. The 3,196 fund of funds in the study – approximately the same number as in 2008 – had $518 billion under management in 2010. This represents a 10.5% decrease from 2009 and a steep 31% decline from 2008 when $750 billion was reported.

Commodity Trading Advisors (CTAs), the third category measured in the study, attracted investors in 2009 as a haven from stocks and bonds as their numbers peaked that year at 2,425. In 2010, the number of CTAs dropped to 1,997 which is approximately the same level as in 2008.

GAM Star Dynamic Global Bond Launch

HedgeCo News: The Star Dynamic Global Bond was launched on the 11th April 2011. The new fixed income – developed markets UCITS hedge fund aims to produce consistent total returns and outperform an index of developed global bond markets over a market cycle.

The UCITS hedge fund has daily redemptions and trades in USD, GBP, EUR, CHF, JPY and SEK. Minimum subscriptions start at USD 20,000,000 or currency equivalent (institutional class) and USD 10,000 or currency equivalent (ordinary class). Manager fees are 0.65% and 0.90, respectively.

The co-managers, Tim Haywood and Daniel Sheard each have over 20 years’ experience. They look to capture both alpha and beta using credit, FX, interest rate and inflation hedges to diversify risk. Their dedicated expertise in non-core sectors and their unconstrained ‘go-anywhere’ approach means the fund is able to access the most interesting opportunities globally, through tactical and dynamic sector rotation.

"Risk management should be integrated philosophically and systematically at each stage of the decision making process." Tim Haywood said, "By assessing the key risks – defaults, inflation, duration, currency (and hedging, as appropriate), we aim to produce an attractive risk/return profile."

Key Facts Include:

• Specialist expertise spanning the global fixed income and currency universes
• Tactical and dynamic rotation of sectors and diversification across a wide range of alpha sources
• Harnessing alpha by understanding what drives markets

"Qualitative and quantitative tools are used on an ongoing basis; modifying positions to limit risk and capture the upside as investment themes evolve." Daniel Sheard explains in the launch release, "In parallel, the independent GAM Market Risk team conducts ongoing monitoring to identify risk ‘hot spots’ and ensure the focus remains clearly on achieving the fund’s long term objectives."

Tim Haywood joined GAM following its acquisition of the fixed income and foreign exchange specialist, Augustus, in May 2009. Tim joined Augustus (then Julius Baer Investments Limited) in 1998 from Orient Overseas International Limited in Hong Kong, where he was CIO. He has worked as both CIO and CEO of Augustus, established the hedge fund business, as well as being the founder and original investment manager of an emerging market bond fund.

Daniel Sheard joined GAM following its acquisition of the fixed income and foreign exchange specialist, Augustus, in May 2009. He joined Augustus (then Julius Baer Investments Limited) in 2006 as deputy chief investment officer and became chief investment officer in 2008. Daniel previously worked at Prudential M&G, where he was a director of the Institutional Fixed Income group. Prior to that he was a principal within the Advanced Strategies group at Barclays Global Investors, and before that was an associate director within the Fixed Income unit at Schroders.

Survey: Old Wine in New Bottles

HedgeCo News - Retirement plans, endowments, foundations and other large investors are looking for hedge funds, funds of hedge funds and investment managers with strong capabilities in global and emerging markets, according to the 2011 Consultant Search Forecast.

This year’s survey, “Old Wine in New Bottles,” polled 55 leading investment consulting firms in the U.S. and Canada responsible for $10.4 trillion in assets under advisement. This was the fifth annual poll conducted jointly by eVestment Alliance (eVestment) and Casey, Quirk & Associates.

Three key trends include:
- Ongoing portfolio globalization
- The increasing role of “alternative” investments—hedge funds, private equity and real estate
- A greater emphasis on outcome-oriented portfolios constructed by risk budgeting and return attribution

Additional significant findings of this year’s survey include:
- More than one-third of consultants expect more emerging markets equity and less international developed markets activity for the remainder of the year
- More than half of U.S. equity, U.S. bond and EAFE searches will involve manager replacements in 2011
- Half of those surveyed expect an increase in institutional interest in inflation hedging strategies this year
- More than one-third of investment consultants surveyed anticipate a boost in liability driven investing (LDI) mandates in 2011
- Three-fifths of consultants expect moderate or strong bond search activity this year
- Consultants expect significant increases in private equity and real estate mandates in 2011

“A sluggish growth in search activity is to be expected, as many in the institutional investment industry emerge from the policy rebalancing many conducted during late 2009 and 2010, following the global financial crisis,” Heath Wilson, eVestment Principal and Founder, said. “eVestment and Casey Quirk hope that the latest search expectations provide a clear picture on how North American institutional investors should adapt to the changing investment frameworks and increasingly competitive environment.”

"One of the more interesting findings in this year's consultant survey is the rising interest in private equity and real assets," Yariv Itah, Casey Quirk Partner, added. "Institutional investors increasingly manage toward outcomes rather than just excess return, and they want asset managers who can use illiquid investments to mitigate inflation risk and manage liabilities."

Coeli Acquires Plenum Power Surge Hedge Fund

Nordic Business Media (HedgeFonder.nu) - Entrepreneurial banking specialist, Coeli AB, has acquired the 43 million-euro ($61 million) Plenum Power Surge hedge fund. Coeli takes over the management of the hedge fund from Plenum Investments.

One of the hedge fund´s co-founders, Henrik Wennberg, will take over as head trader starting May 1st 2010. The fund will be re-named the Coeli Power Surge Fund and will retain it's strategy of investing in Nordic electricity contracts, according to a letter from the Swedish banking specialist.

“Considering the very specialized knowledge and commitment it takes to be successful in this market, It is necessary to be able to focus my solely on managing the portfolio.” Wennberg said of the acquisition, ”By working with Coeli, I will have the opportunity to do so. Coeli has the strong infrastructure with licenses, administration, risk management and distribution that international investors are looking for.”

Wennberg has been a senior fund adviser for the Plenum Power Surge fund and an electricity trader for more than 12 years, Wennberg joined Plenum in 2005 from Norweigan energy fund, Markedskraft ASA.

Coeli is also aquiring a majority stake in Wennberg International Advisory AB. Coeli now offers a new single manager hedge fund with focus exclusively on the Nordic power market.

Alex Åkesson
Editor for Nordic Business Media AB

Hedge Fund Acquisitions: Medley/Viathon

HedgeCo News - NY-based Medley Capital LLC has announced the acquisition of credit hedge fund manager Viathon Capital LP and all its related entities.

"This transaction combines the analytical and credit strengths of the two organizations." Brook Taube, Managing Partner at Medley said.

"Having known the Medley team for some time, I am excited about the opportunity to leverage our combined resources and to grow the firm's investment management and advisory franchise," Robert Comizio, Viathon founder, added.

Medley is a U.S. registered investment adviser with $1.4 billion of assets under management in private investment funds and hedge funds

Predominantly focused on companies in North America and Europe, Viathon invests in fundamental and event driven opportunities across the credit spectrum.