Gartmore To Launch Credit FundGartmore Investment Managementexpects to launch a credit hedge fund inSeptember investing in floating ratenotes and bank debt.

See story, page 4

At Press TimeBlackRock Taps CIO For Japan JV 2Ramsey Snags Client Service Head 2

U.S. NewsQuadriga Preps U.S. Expansion 3Taubman Family Hires Alts. Head 3Galleon Marketer Exits 3CPO Lands Refco Pro 4Harbert Venture Buys Power Portfolio 4

European NewsAsset Alliance Hires Marketing Mgr. 4Pen-Sam Eyes Hedge Funds 5Incubator Lines Up Funds 5HSBC Hires Managers 5Liongate Sets Sights On U.S. 6

Under The HoodNew York Fund Bearish On Oil 8Gartmore Gobbles Up Small-Cap 8LibertyView Credit Fund Wins

With Calpine 8

DepartmentsSearch & Hire Directory 9

HEDGE FUNDS BIND STAFF WITH DEFERRED BONUSES

Hedge fund firms are deferring bonuses and othercompensation to keep employees from heading forthe exit. The practice has been common in otherareas of financial services, but hedge funds are nowstarting to jump on the bandwagon. Many firmshave seen some of their top stars leave to start their

(continued on page 11)

HARVEY PITT-CONNECTED FIRMROLLS OUT INDIAN FUNDHudson Fairfax Capital, a new hedge fund firm whoseadvisory board includes former Securities and ExchangeCommission chairman Harvey Pitt, is forming an Indianlong/short equity fund to be launched this fall. The firm is ajoint venture between Hudson Fairfax Group, an Indianinvestment firm, and Balestra Capital Management, a hedge fund

(continued on page 12)

Mega Mandates?WILSHIRE TO CREATE HEDGE FUND PLATFORMWilshire Associates is working on a platform to allow its clients to create bespoke funds offunds. The platform would potentially be a windfall for hedge funds via access to the firm’slarge institutional client base.

There are similar platforms in place at HFR Asset Management, PlusFunds Group andLyxor Asset Management. As investors gain more experience, they are becoming moreselective and more capable of constructing their own portfolios, John Godden, managing

(continued on page 12)

FORMER CATEQUIL MANAGER PLANS METALS FUNDRobert Ellis, co-founder of Catequil Asset Management and a Tiger Management alum, isprepping a fund at his new firm, Ridgefield Capital Asset Management. The commoditiesfund will focus on precious metals and is expected to be launched this quarter. Ridgefieldcurrently runs two other commodity funds. Ellis did not return calls for comment.

Ellis’ planned launch follows former partner Paul Touradji’s new billion-dollar fund. Ellisand fellow Tiger alum Touradji founded Catequil in 2000 before having a falling out.

(continued on page 11)

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BlackRock Hires CIO For Japanese JVNomura BlackRock Asset Management, a Japanese joint venture betweenBlackRock and Nomura Asset Management, has tapped a cio. HitoshiKudo joined the firm as cio and head of alternative investments on Aug. 1.He came on board from Nikko Asset Management, where his role wasdescribed as “hedge fund gatekeeper,” by an insider. Calls to Nikkospokesmen were not returned. Calls to BlackRock officials were referred toBrian Beades, spokesman, who did not return calls. Kudo could not bereached for comment.

Ramsey Hires Client Service HeadBillion-dollar hedge fund firm Ramsey Quantitative Systems Inc. has hired amanager of client services and marketing. It has tapped John Molesphini fromINVESCO to fill the role. The move is consistent with an industry-wide trend ofinstitutionalizing client service, said Ron Klotter, president. At INVESCO,Molesphini worked with the firm’s marketing team, as well as with externalconsultant relations.

The Louisville, Ky.-based firm is also in the process of planning acommodities fund with a weather component to be launched in the fall (AIN,7/4). The fund is still in its capital-raising phase.

Babson To Launch Micro-Cap Fund Babson Capital Management is planning to launch a long/short micro-cap fundin January. It will be run by Paul Szczygiel and Rob Baumbach, lead portfoliomanagers who oversee $2.5 billion in small-cap growth, small-cap core andmicro-cap strategies for Babson. The duo will stop managing their long-onlyportfolios to focus on the hedge fund, according to AIN sister publication MoneyManagement Letter.

Szczygiel and Baumbach, who did not return calls, told Babson Capital theyintended to leave after being approached by a hedge fund. Babson Capitaloffered them the opportunity to stay with the firm and launch a micro-caphedge fund.

The decision has led some institutions investing in their long-only strategiesto reconsider those investments. A consultant said he knows of one pension fundthat is terminating Babson Capital because of the personnel shift and he expectsthe firm to see other terminations. “I think it’s safe to bet that everyone willreview this,” he said.

Faith Yando at Compton Consulting, a public relations firm that representsBabson, said the five other members of the small-cap team, all of whom arestaying with Babson Capital, have nearly 60 years of experience between them.“Babson Capital is confident in the team’s ability to continue to provide a highlevel of investment performance and client service,” she added. Babson has yet todecide whether to promote one of the team members to head up the team orhire externally.

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Quadriga Plans U.S. ExpansionAustrian commodity trading advisor QuadrigaInvestment Group is seeking to expand itsbusiness in the U.S. and plans to hire four tosix senior sales staff, as well as marketing andpress relations personnel, for its New Yorkoffice. “We believe the U.S. has tremdouspotential, since private investors are morefamiliar with managed futures and trend-

following strategies,” said Christian Baha, ceo. Currently, 47 of thefirm’s 330 employees are in the U.S.; 29 in Chicago, where thefirm has its trading desk, and 18 in New York.

Quadriga manages the Superfund products, which are availableto the retail public for a $5,000 investment minimum. The firmcurrently has $2 billion in assets from 55,000 clients.

Taubman Family Office Hires Alts. HeadTaubman Asset Group, the Bloomfield Hills, Mich., familyoffice for the Taubman family, has hired Dina McClung to headits alternative investment allocations. McClung replaces MaryNapier and Brian Lasher, both of whom departed the firm lastmonth. McClung, v.p. of hedge fund and private equityinvestments, joins Taubman from DTE Energy, a regionalenergy company based in Detroit where she was director of trustinvestments.

McClung said she did not yet know if she planned hires anddeclined to discuss hedge fund mandates. The Taubman family isled by patriarch Alfred Taubman. He has a net worth of around$900 million, according Forbes’ rankings of the 400 wealthiestAmericans. His son, Robert, is the chairman and ceo of publicly-traded real estate concern Taubman Centers.

Jennison Manager Preps FundJeffrey Siegel, an executive v.p. and portfolio manager atJennison Associates, has departed to found Riveredge CapitalPartners, which will roll out its first fund in September. Thelong/short equities fund is expected to launch with about$10 million. Joining Siegel at the Irvington, N.Y.-based firm isRobert Lande, cfo of Telecom Américas, a joint venture betweenBell Canada International, Telefonos de Mexico and SBCCommunications.

Sigel and Lande met through a mutual friend, and Siegel saidhe had been wanting to launch his own fund for several years. Thefund will invest about 15% of its assets in international equitiesand the rest in U.S. stocks, Siegel said. It will take 25-35 long

positions and 10-20 short positions. The firm will be hiring athird-party marketer to pitch the fund to high-net-worthindividuals, funds of funds and institutions once it has anestablished track record. The minimum investment will be$250,000. The fund will have a 1.5% management fee and a 20%performance fee. The prime broker will be Goldman Sachs.

S&P Hedge Fund Index Pro Leaves For PlusFundsSteven Oyer, managing director responsible for hedge fund indexsales for Standard & Poor’s in New York, has jumped toinvestment manager PlusFunds Group. Oyer has been hired as amanaging director and will handle global business developmentof PlusFund’s managed accounts, which the S&P Hedge FundIndex references. At PlusFunds, Oyer reports to Paul Aaronson,ceo, who did not return calls.

Galleon Marketer DepartsAshwan Khanna, a managing director at long/short equity titanGalleon Management, has left the firm. Khanna joined the$3 billion firm in January as head of marketing and businessdevelopment (AIN, 1/17). An industry official said Khanna isinterested in launching his own fund.

A Galleon official said Khanna’s duties would be absorbedinternally and that the firm has not yet decided if it will hire areplacement. Prior to joining Galleon, Khanna was a managingpartner at third-party marketing firm Taurus Global FundAdvisors. He declined to comment.

Private Equity Firm Branches Into Hedge Funds Callidus Capital Management, a $1 billion New York-based privateequity, structured bond and loan fund specialist, has launched itsfirst hedge fund. The capital structure arbitrage fund was launchedwith $100 million, said an industry official familiar with the launch.The Saepes Capital Investors fund takes 30-50 positions, primarily innon-investment-grade and senior secured floating rate bank debt,which are hedged with short positions in fixed-rate juniorinstruments of the same or highly-correlated issuers.

The fund carries a 2% management fee and a 20%performance fee. The minimum investment is $1 million. It isopen to high-net-worth individuals, pensions, foundations,endowments and funds of funds. Richard Ivers, co-founder andceo, did not return calls.

August 8, 2005 www.iialternatives.com Alternative Investment News

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U.S. News

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CPO Nabs Refco Pro Beeland Management Company, a Chicago-based commoditypool operator, has nabbed Robert Mercorella, to be its chiefoperating officer. Mercorella was senior v.p., director of globalmarketing and business development at Refco Group. His positionat Beeland is a new one with the firm. He will coordinate andsupervise operations including legal, accounting, and administrativefunctions. Mercorella is also responsible for investor relationships aswell as administration and supervision of investment vehicles basedon the Rogers International Commodities Index.

The firm is looking to grow and Mercorella said he will helpevaluate the market and plan the launch of new funds. The firmis also looking to expand its distribution, Mercorella said,declining to elaborate. The firm is likely to make further hires.Mercorella said he joined Beeland because he saw theopportunity to get involved with the commodities market. “Itwas just the right time to make this move. Commodities haveseen some of the higher values and pricing that stocks have, and Ijust thought was a great time to do this.”

Harbert Venture Bags InterGen North American FleetKelson Holdings LLC has inked a purchase and sale agreementto acquire InterGen’s 3GW North American IPP portfolio. Theholding company is a joint venture between managementcompany Kelson Energy and hedge fund firm HarbertManagement’s Distressed Investment Master Fund, said NealCody, partner in Baltimore, declining to comment further.

The joint venture signed a share purchase agreement thatallows it to purchase Maple Power Company LLC, a holdingcompany created to essentially incorporate the assets and themanagement and operating contracts associated with them.

The sale of the assets, which were owned by sponsors RoyalDutch/Shell Group and Bechtel Corp., should close mid-September, said Jeff Leichtman, an external spokesman in NewHaven, Conn., hired by Maple Power. Market watchers sayHarbert is serving as a passive investor while Kelson Energy willmanage the assets.

Gartmore To Launch Credit FundGartmore Investment Management expects to launch a credithedge fund in September investing in floating rate notes andbank debt. The move follows a restructuring of the firm’s SICAVoffering, which merged at the end of March with GartmoreCapital Strategy’s fund range. This amalgamated assets, reducedcosts and provided a passport for other countries, as the fundsare domiciled in Dublin and Luxembourg, said Victoria Huerta,head of Gartmore’s Madrid office. The amalgamated SICAVfund range now has 21 money market, fixed-income and equitysub-funds with over €3 billion in assets.

The new credit fund, which was cloned from the AlphaGenGlobal Credit Fund, will take long and short positions infloating rate notes, U.S. and European bank debt, investment-grade bonds and high-yield issuers. The new fund will be runby Varkki Chacko and Mark Wauton, who already have a two-year track record through the AlphaGen fund. The credit fundwill be domiciled in Dublin with a minimum investment of€250,000 from both institutional and retail investors. It aims toreach Libor plus 200 basis points for its annualized return, with2-3% volatility.

Separately, Gartmore has strengthened its sales team with theappointment of Jaime Mesia as a sales manager. Hisresponsibilities include selling Gartmore’s long-only products aswell as alternatives, such as hedge funds, private equity andfunds of funds, to new and existing Spanish clients. He joinsfrom brokerage firm Chevreux, where he was selling Spanish

equity to U.K. and Nordic clients. “I wanted a break into a newbusiness area and Gartmore was the perfect opportunity,” hesaid. Mesia has replaced Francisco Gimeno who left for DexiaAsset Management three months ago.

In the light of draft regulations, which allow domestic fundsof hedge funds for the first time to invest in offshore-registeredhedge funds, Huerta sees this as an open opportunity for fundmanagers to increase assets under management. “It gives[investors] the chance to invest in less decaffeinated hedgefunds,” she reasoned, meaning investors would have a morediversified array of strategies to invest in. The new credit fundwill be available to Spanish Investors.

Asset Alliance Taps Marketing ManagerAsset Alliance International, the London-based subsidiary of$4 billion New York-based Asset Alliance, has hired KellyRajpaulsingh as a marketing manager. Rajpaulsingh said she willbe responsible for helping to market the firm in Europe. Shejoins from Italian fund of funds Rasini. Her position at AssetAlliance International is a new one, said James Parker, managingdirector and head of the firm’s London operations.

The firm also hired a senior analyst, Emily Porter, fromAurum Funds. Porter only spent a brief stint at Aurum, whichshe joined from Parker’s old firm ABN Amro. She will partlytake over the activities of Andrew Kinsey-Quick and Andrew

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Scott, two analysts who recently left the firm. Kinsey-Quick isnow an investment analyst at Eden Rock Capital Managementin London and Scott returned to full-time study. Kinsey-Quicksaid his role at Eden Rock is a new one within the research team.

Private Equity, Hedge Funds On Danish Fund’s AgendaPen-Sam, the Danish multi-employer pension fund for themedical sector, will search for a global private equity fund offunds manager to work alongside incumbent Wilshire Associatesbefore the end of this year. The DKK50 billion (£4.6 billion)fund wants to diversify manager risk with the move, whichfollows a regular review. It plans to increase its allocation toprivate equity to 5% of its total assets from the current 1.1% inthe next couple of years. The mandate will be funded fromequity. If its investment board approves, it could also make amaiden allocation to hedge funds later this year to diversifyfurther, said Jens Elkjaer, head of equity. The fund has beenstudying the asset class since last year and was waiting for theregulatory guidelines on hedge fund investments, which wasreleased recently. If it goes ahead with the hedge fund allocation,it would search for a fund of funds manager later this year for theforay. It plans to make an allocation of less than 5% of its totalassets to the asset class—more like “dipping our toes in the sea ofhedge funds,” said Elkjaer. “We do not see hedge funds as anequity tool. We would like to use it to reduce the overall volatilityof our assets and to increase the expected rate of return.”

As the fund has not firmed up its decision on the hedge fundforay, it has yet to decide on the exact size of the allocation andways to fund it. The fund does not use an investment consultant.

London CTA Outlines Asset GrowthLondon-based CTA firm Mulvaney Capital Management isplanning to more than double the assets in its $70 millionsystematic commodities fund, to $150 million by the end of2006. The firm has set a capacity of $500 million, and hopes toreach this figure within three years, said Paul Mulvaney,founder and cio.

The firm has been considering rolling out other funds for awhile, and a second offering is likely to be developed that willtrade options (iialternatives.com, 10/15). This will not happenuntil the existing fund reaches critical mass at $150 million,continued Mulvaney. At this stage, the amount of money madethrough management fees will have an increased impact on thebusiness, allowing the firm to grow its headcount as well aslaunch new products. The firm is not looking to make anyhires yet.

“It can be very tough to raise assets; it takes a long time,” he

said. Mulvaney has travelled extensively to promote his fund, andhas also used third-party marketers. The firm will consider anyapproach. The strategy has been running since 1999, and this islikely to help marketing efforts. “Investors want track records,and a lot want at least three years,” he observed.

Hedge Fund Incubator Lines Up New FundsSchneider Capital Management, a firm that was set up in 2003to provide infrastructure and set-up assistance to emerging hedgefund managers, is preparing to help launch three new funds inthe next few months. These will be a managed futures fund, dueto be rolled out this month; a global macro/tactical assetallocation fund in September; and a fund trading weatherderivatives that is scheduled for an October launch, said ShabirChowdhary, director of sales and marketing. He declined toelaborate.

The firm has already incubated 11 hedge funds, which useresources and floor space at its office in the City. The location hasreached capacity and Schneider is planning to open a West Endsite in the next few months. Some of the existing managers willmigrate, preferring to be nearer to the hedge fund square mile ofMayfair, said Chowdhary. The new office will also provide spacefor new clients.

HSBC Taps Managers, Preps Tech FundHSBC’s single-manager hedge fund arm, HSBC AlternativeInvestments Limited, has tapped a pair of managers to launch atechnology fund. The firm has hired Michael Dillon and ConorO’Mara from Arete Research, a London-based boutiqueresearch firm focused on technology stocks, where they wereboth partners. The duo joined HSBC AIL last week, said BillMaldonado, ceo.

The tech fund is scheduled to launch on Sept. 1; the firm hasbeen planning to develop such an offering for some time(iialternatives.com, 2/11). It will start with $50 million, $25million of which will come from HSBC. The other $25 millionis from a London-based hedge fund firm, said Maldonado,declining to name the investor. The strategy will have a capacityof $400-500 million. It will have the ability to take directionalrisk but will be effectively market-neutral for a large proportionof the time, he added.

The fund will be listed and domiciled in Dublin and willhave a 1.5% management fee and a 20% performance fee.HSBC AIL will initially offer the fund to institutional investorswith a specific interest in early-stage funds or technologystrategies, before broadening its marketing push after about six

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August 8, 2005 www.iialternatives.com Alternative Investment News

months, stated Maldonado. Dillon and O’Mara were not available to comment. Harriet

Tory, an Arete spokeswoman, did not return a call.

Hedge Funds Next On SwedishPlan’s AgendaAP-Fonden 1, Sweden’s first state pension fund, will discuss apossible first foray into hedge funds next year once it completesits private equity allocations next month. The SEK157 billion(€16 billion) fund will invest in hedge funds only if it proves tobe a “big diversifier beyond doubt,” said Rikard Kjorling, headof external management in Stockholm. The fund wants to boostreturns through asset class and regional diversification. If itdecides to allocate to hedge funds, it will be more than 1% of theentire fund. “I do not want to say anything further as it is tooearly to comment on hedge funds at this stage,” he said. Hedeclined to discuss how the mandate is to be funded, if it decidesto allocate.

Additionally, the scheme has selected three managers to handleglobal, European and U.S. private equity mandates totaling$300 million, along with three standby managers, said Kjorling.AP1 will discuss next month whether to split the mandates

equally among the three managers. He declined to name theselected firms, stating that it would be made public next month.The scheme has yet to finalize its funding plans. Towers Perrinadvised on manager selection.

Liongate Targets U.S. InvestorsLiongate Capital Management, the London-based fund of fundsfirm with $130 million in assets, has opened its multi-strategyfund to direct investment by U.S.-based high-net-worthindividuals. It has also listed the fund on the Irish StockExchange. Both developments are part of the firm’s initiative tomake its fund of funds available to as many investors as possible,said Jeff Holland, partner. The firm is also planning to usedistribution partners (iialternatives.com, 6/24).

“We had to think about how we wanted to approach the U.S.market,” said Holland, who added that Liongate is also workingto register with the Securities and Exchange Commission. Thefirm has already accepted a few U.S. investors since June. TheIrish listing is an attempt to attract more large Europeaninvestors. “A lot of Europe-based institutions like to see a listing,”he observed, adding that many require this of any prospectivehedge fund investment.

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Macro Fund Buys Oil Puts New York-based global macro firm Combinatorics Capital islooking to profit from significantly lower oil prices by year-end.Ram Bhagavatula, managing director, bought deep-out-of-the-money put options on $40 December crude oil futures contracts.Bhagavatula said the trade was relatively small as a proportion ofhis fund’s portfolio. As such it does not carry much risk, yetcould conceivably generate high returns should the fund’sforecast of $40 per barrel crude prices become a reality. “In thehedge fund business, you have to make moves like that,” he said.

Combinatorics stands to profit from the trade should oil pricesstart to approach $40 per barrel because the value of the optionswill increase. The fund could have a bigger pay day if the price ofoil dips below $40, at which point the options are in-the-money.

The rise in oil prices can be traced in large part to lowinventory levels in the U.S. and elsewhere, reasoned Bhagavatula.As countries rushed to replenish their stockpiles in 2004 and thisyear, this demand pushed the price of oil higher, he explained.But Bhagavatula, who has been tracking U.S. inventory levels,said recent data indicates stockpiles are now approaching thehigher end of their range. “My presumption is, the same thing ishappening everywhere,” he said, adding that such data is notavailable for most countries. This trend is amplified by theseasonal impact, he said, noting that the build-up for summerdriving season has essentially passed. “By late September, oilprices will be quite a bit lower,” Bhagavatula predicted.

Gartmore Ups Small-Cap Allocations Gartmore Investment Management has increased the focus oncompanies with a market capitalization below €200 million inits AlphaGen Cepheus Fund. These now account for about 20-25% of the portfolio, compared with 5-10% a few monthsago, said Jonathan Sharpe, who manages the fund alongsideTamsin Quayle. The move reflects a structural shift. The fundhas been running since early 2001 and the managers are nowwilling to accept lower liquidity in a portion of the fund, heexplained. “We’ve got a good feel for the returns and volatilityof the fund now.”

Among the small-cap successes for the fund are Curanum, aGerman company that operates nursing homes, and PunchInternational, which competes in the digital printing andautomotive component markets. Both were discovered during ascreening process undertaken around January, said Sharpe.

Gartmore bought a 5% stake in Curanum in January for €2.43

per share; this has risen by about 95% to €4.73. Curanumaccounts for 2% of the fund’s portfolio. Punch is a smallerposition, at 1% of the portfolio. It has a market cap of €140million and was bought by Gartmore in March at €53. It is nowtrading at around €65-70, observed Sharpe.

The fund was up 2.7% in June, bringing the euro class to8.5% for the year-to-date. It benefited from a long position in oilservices as oil traded up during the month. The fund has takensome profits in the sector but remains 9% net long, said Sharpe.Another win came from a position the fund has held for over fouryears, in classified advertising publisher Trader Classified Media.Gartmore bought the stock for €4; it was trading at around €12last week. The company is increasingly going online and is alsogrowing in China and India. Sharpe said this position is about 2%of the fund but is likely to be increased.

LibertyView Credit Fund MakesCalpine PlayLibertyView Capital Management’s capital structure arbitragefund was up 1.3% in June, partly due to a position in CalpineCorp. The LibertyView Credit Opportunities Fund had beenbuilding a position in Calpine’s first lien debt over the past fewmonths. In April, this position helped contribute to a loss whenrumors of a bankruptcy by the energy concern caused its entirecapital structure to trade down (iialternatives.com, 5/27). Thefund hedged its position by shorting the company’s junior debt,explained Brian MacHale, managing director.

LibertyView bought the debt thinking that Calpine would nothead into bankruptcy and might have to tender the notes. InJune, the company announced its intentions to sell its natural gasassets to a subsidiary, which obligated it to tender its first liendebt pursuant to bond covenants.

The roughly $197 million fund also took advantage of atender offer by Saks Inc. through an event-driven trade. Thedepartment store concern received a notice of default from ahedge fund that held its convertible securities. As a result,LibertyView thought the company would be forced to tenderits senior notes. The fund bought the bonds in the low 90s andwithin about 10-days, the company tendered the notes at par,said MacHale.

The fund is up 3.4% for the year through July, and was up1.13% in July. The fund is managed by a team of three portfoliomanagers led by Randy Hutton. LibertyView, which managesroughly $1.75 billion, is a division of Neuberger Berman.

Under The Hood: AIN’s look inside hedge fund strategies

AIN080805 8/4/05 5:55 PM Page 8

August 8, 2005 www.iialternatives.com Alternative Investment News

Copying prohibited without the permission of the publisher. 9

Data provided by iisearches—the premier daily sales and marketing research tool for investment managers. For further information on iisearches’ daily search leads and searchable database ofmandates awarded and lost since 1995, please visit iisearches.com or contact Keith Arends at 212 224 3533 or karends@iinews.com.

Search & Hire DirectoryThe following directory includes search and hire activity for the week. The accuracy of the information, which is derived from many sources, isdeemed reliable but cannot be guaranteed. All amounts are in US$ millions unless otherwise stated. To report manager hires and new searches,please call Mark Faro at (212) 224-3287, Nathaniel Baker at (212) 224-3648, Jennifer McCandless at (212) 224-3615 and RobertMurray at 44 (0)207 303 1705 or fax (212) 224-3939.

Potential SearchesMandate

Total Fund SizeFund Amt (Mlns) Type Assignment (Mlns) Consultant CommentsBeamtenversicherungskasse des EUR1,237 Public D.B. Global/Alternative/ EUR494 Strategic Capital Will make a maiden investment worth between EUR370-494M.Kantons Zurich Commodities ManagementClaremont McKenna College USD400 Endowment US/Alternative/ N/A Cambridge Associates Hoping to commit to new opportunities over the next year or so.

Private EquityDenison University USD482 Endowment US/Alternative/ USD24 Stephen L. Nesbitt, Currently in midst of an investment review. Planning on boosting

Private Equity Cliffwater, LLC its private equity exposure to 15% from 10%.Goucher College USD123 Endowment US/Alternative/ N/A Cambridge Associates Seeking venture capital to fulfill its target strategic allocation.

Venture Capital Funding to come from rebalancing other asset classes.Goucher College USD123 Endowment US/Alternative/Energy N/A Cambridge Associates Funding to come from rebalancing other asset classes.

New SearchesFall River (Mass.) Contributory USD216 Public D.B. US/Alternative/Private USD10 Alison Marelli, Meketa RFPs are available at (http://www.meketagroup.com/Retirement System Equity Fund-of-Funds Investment Group mgrCenter.php). Proposals are due September 16.Massachusetts Housing Finance Agency USD50 Public D.B. US/Alternative/Private USD3 Alison Marelli, Meketa RFPs are available at (http://www.meketagroup.com/Retirement System Equity Fund-of-Funds Investment Group mgrCenter.php). Proposals are due September 16.

Updated SearchesAmeren Corporation USD1,400 Corporate D.B. US/Alternative/ N/A Summit Strategies Group Plan was considering adding hedge funds, but no action has

Hedge Fund-of-Funds taken place.Beamtenversicherungskasse des EUR1,237 Public D.B. Global/Alternative/ N/A Strategic Capital Plans to increase its private equity exposure at the expense of Kantons Zurich Private Equity Management large-cap equity.Eastman Chemical Company USD1,000 Corporate D.B. US/Alternative N/A None Will hire manager(s) on an opportunistic basis.Fairfax County (Va.) Employees' USD2,100 Public D.B. US/Alternative/ N/A None May select a firm by the end of the month.Retirement System CommoditiesLondon Borough of Greenwich Pension GBP500 Public D.B. Global/Alternative/Private GBP40 David Walker, Hymans Hopes to release this information in the next couple of weeks.Fund Equity Fund-of-Funds RobertsonLouisiana State Police Retirement System USD340 Public D.B. US/Alternative N/A UBS PaineWebber Will decide whether to search once liability is complete.Montgomery County (Md.) Employees USD2,100 Public D.B. US/Alternative/Private N/A Wilshire Associates Interviewing firms. Will select a manger by the end of August.Retirement System Equity Fund-of-FundsPen-Sam DKK50,000 Union/Multi- Global/Alternative/ N/A None First foray into fund-of-funds subject to its investment board

employer D.B. Hedge Fund-of-Funds approval later this year.Pen-Sam DKK50,000 Union/Multi- Global/Alternative/Private N/A None Plans raise its exposure to private equity to 5% from 1.1%.

employer D.B. Equity Fund-of-FundsPensioenfonds Horeca & Catering EUR1,970 Corporate D.B. Global/Alternative/ N/A Dolf Hoeks, Watson Wyatt Fund will ask its consultant to make a shortlist of commodity

Commodities Worldwide managers. It plans to allocate 5% to commodities.Pensioenfonds Horeca & Catering EUR1,600 Corporate D.B. Global/Alternative/ N/A Dolf Hoeks, Watson Wyatt Will not invest in hedge funds due to lack of transparency.

Hedge Fund WorldwidePhiladelphia Public Employees' USD4,200 Public D.B. US/Alternative/ USD54 Tina V. Poitevien, Fiduciary Finalists selected: Goldman Sachs Asset Management, Retirement System Hedge Fund Investment Solutions K2 Advisors, Mesirow Financial and Private Advisors. University of Arkansas Foundation USD850 Foundation US/Alternative USD102 Cambridge Associates Will discuss raising its 12% allocation to alternatives.

Completed SearchesMetropolitan St. Louis Sewer District USD115 Public D.B. US/Alternative/Hedge Fund USD8 New England Pension Fidelity Investments

ConsultantsNY State Teachers' Retirement System USD84,000 Public D.B. US/Alternative/Private Equity USD80 Callan Associates JPMorgan Asset ManagementNY State Teachers' Retirement System USD84,000 Public D.B. US/Alternative/Private Equity USD150 Callan Associates Credit Suisse First BostonNY State Teachers' Retirement System USD84,000 Public D.B. US/Alternative/Private Equity USD200 Callan Associates Lexington Capital PartnersNY State Teachers' Retirement System USD84,000 Public D.B. US/Alternative/Private Equity USD20 Callan Associates JPMorgan Asset ManagementOregon Public Employees Retirement USD49,000 Public D.B. Asia/Alternative/ USD100 Pacific Corporate Group JPMorgan Alternative Asset Management IncFund Private EquityOregon Public Employees Retirement USD49,000 Public D.B. US/Alternative/ USD200 Pacific Corporate Group Warburg Pincus Asset ManagementFund Private EquityPatterson Dental Co. USD600 Corporate D.B. US/Alternative/ USD50 Rocaton Investment Avenue Special Situations

Venture Capital Advisors

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Project1 8/2/05 10:04 AM Page 1

August 8, 2005 www.iialternatives.com Alternative Investment News

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FrontPoint Shuts DownQuant FundFrontPoint Partners has for the firsttime liquidated one of its funds. TheGreenwich, Conn.-based hedge fundjuggernaut has shut down theQuantitative Equity Strategies (QES) fund.

See story, page 19

At Press TimeEx-Ranger Manager Readies Fund 2

U.S. Searches Ispat Inland Considers Mezz. Search 10Albuquerque School Weighs Funds 12

European Searches French Insurer Seeks Hedge Funds 16Health Charity Makes Foray 16

U.S. Manager NewsFormer Caxton Bond Trader Returns 19Amaranth Unveils Changes 20

European Manager NewsQuadriga Readies Fund 22

News From Other PortsTelstra To Tap Managers 25

DepartmentsMarket Focus

6Search & Hire Directory 18

LONGHORNS TO PLOW INTO ALTSThe University of Texas System’s $11.5 billion endowment funds areseeking to add roughly $575 million in new hedge fund investments thisyear. The funds, which are managed by the University of TexasInvestment Management Company (UTIMCO), currently have a littleover 20% of their assets allocated to hedge funds, and the goal is to havea 25% allocation, said Bob Boldt, cio. The school is leaning towardsinvesting in absolute return funds over other hedge fund styles, Boldt(continued on page 4)

FARALLON FOLLOWS LONE PINE’S LEAD ON HIGH-WATER MARKSFarallon Capital Management, the San Francisco-based hedge fund behemoth run by TomSteyer, is the latest hedge fund manager to propose changes to its high-water markprovisions. As first reported on AIN’s Web site, www.iialternatives.com, the move would putthe firm in line with a growing number of funds adopting changes first proposed last springby Tiger cub Lone Pine Capital that allow hedge fund managers to earn performance feeseven when their funds are under water. Farallon wants the ability to earn a reduced

(continued on page 26)

KLM TO WEIGH FUNDS OF FUNDSThe €8 billion KLM Pensioenfonds, the Amstelveen-basedpension plan for pilots, crew members and ground staff ofKLM Royal Dutch Airlines, may make its first foray intohedge funds of funds this year. Fons Lute, cio of Blue SkyGroup, the money management subsidiary of KLMPensionenfonds, said he plans to recommend a 2-5% allocation tohedge funds of funds at a board meeting in April.

(continued on page 26)

GATE SLAMS ON MILLENNIUM INVESTORSSome investors looking to get out of an offshore fundlast quarter run by multi-billion dollar hedge fund firmMillennium International Management found theywere stuck. That’s because following a guilty plea by aformer senior trader at the Millennium InternationalFund, the fund’s redemption limits were reached,

(continued on page 25)

COPYRIGHT NOTICE: No part of this publication maybe copied, photocopied or duplicated in any form or byany means without Institutional Investor’s prior writtenconsent. Copying of this publication is in violation of theFederal Copyright Law (17 USC 101 et seq.). Violatorsmay be subject to criminal penalties as well as liabilityfor substantial monetary damages, including statutorydamages up to $100,000 per infringement, costs andattorney’s fees. Copyright 2004 Institutional Investor,Inc. All rights reserved.

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Check www.iialternatives.com during the week for breaking news and updates.

JANUARY 2004VOL. V, NO. 1

Bob Boldt

Touradji is more energy-focused, while Ellis has traditionallybeen focused on grain trading. –J.M.

FORMER CATEQUIL(continued from page 1)

own funds or go to competitors, which have caused headaches.“Firms really don’t want to have a down year then have a lot ofturnover because it worries investors,” said Adam Herz, at searchfirm Hunter Advisors.

For analysts and senior analysts, firms are deferring 20-40% ofbonuses for a period of one- to three-years, said Claude Schwab,founder of Schwab Enterprise, a headhunter in New York.Other senior professionals could have more of their bonusesdeferred, he added. “I think this will become more of the norm.Most people will think twice before walking away from the tableif they stand to lose a lot of money,” said Schwab.

The deferred compensation is released if the employee isstill with the firm at the end of the deferral period. In theevent of a termination, the staffer is still entitled to his moneyif he was fired without cause. But if he leaves willingly, is firedwith cause or the fund blows up, the money is lost. “Noteveryone is happy about it. Not only does it prevent themfrom leaving at their leisure, but given hedge funds’reputation, their money could be there one day and gone thenext,” said Schwab.

Some headhunters were not sure the strategy would work as aretention tool. “This can backfire on a firm in a down year

HEDGE FUNDS(continued from page 1)

because some people will think that if they aren’t going to bereceiving as large a bonus, they aren’t leaving too much on thetable so they’ll move on,” Herz cautioned.

There is really nothing to stop a firm from instituting thedeferral as long as the policy is in writing, said Brian Snarr, apartner at law firm Morrison Cohen. Typically, deferred moneyis put into a firm’s offshore funds for tax purposes, as theemployee only is taxed when he receives his payment. In theevent the staffer is unable to collect the deferred compensation, itcan revert back to the general partner or be dispersed amongother employees, said Snarr.

The issue is a hot potato with hedge funds because Congresspassed the American Job Creation Act in October, which redefinedregulations for setting up deferred compensation schemes. Thefinal clarifications for these plans, which traditionally have been setup for tax deferral purposes, have not been finalized and theInternal Revenue Service is expected to make a decision shortly.As a result, some hedge fund officials contacted by AIN said theissue was too hot to discuss. —Jennifer McCandless

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Alternative Investment News www.iialternatives.com August 8, 2005

Copying prohibited without the permission of the publisher.12

Quote Of The Week“Not only does it prevent them from leaving at their leisure, butgiven hedge funds’ reputation, their money could be there one dayand gone the next.”—Claude Schwab, founder of SchwabEnterprise, on why employees may not like being handcuffed withdeferred bonuses (see story, page 1).

One Year Ago In Alternative Investment NewsAladdin Capital Management, the $4 billion Stamford,Conn.-based hedge fund and collateralized debt obligationmanager, was planning to increase its participation in thestructured credit market and was prepping an open-endedcredit fund. [The firm later issued two CDOs backed by asset-backed securities and commercial mortgage-backed securities.Aladdin hired Anatoly Burman to head up its ABS andCMBS purchasing activity (AIN, 2/21). It also rounded outthe team by hiring Isaac Efrat, Nunzio Masone, MartinDeVito and Shirley Cho (AIN, 5/23).]

The Long & Short Of ItGoing Short: Move over, HowardStern. Gerald Klein and StephanPeasley, principals from GeraldKlein & Associates and Klein Pavlis& Peasley, Financial, apparently

thought they could make a splash onthe radio discussing their hedge funds,

but the Securities and ExchangeCommission saw things differently and accused them ofadvertising. The SEC settled a case with the firms following atleast one radio appearance where the principals discussed thefunds, including the reason for starting them, the investmentstrategies and minimum investment amounts. The principalsalso touted their funds at investment seminars and posted theirperformance and other information on a Web site accessible bythe general public. In settling with the SEC, the firms agreed toappoint an independent consultant and pay a $20,000 fine,though that’s a far cry from the $495,000 in fines Stern earnedClear Channel Communications in April, 2004 for 18separate violations of federal decency rules.

firm in New York. The HFC India Fund isexpected to launch with over $100 million onOct. 1.

The advisory board also includes SurendraDave, former chairman of the Securities andExchange Board of India, Marc Faber, aninvestment strategist known as “Dr. Doom”for his über-bearish outlook, Shankar

Acharya, former chief economic advisor to the Indiangovernment, Domingo Cavallo, former economics minister ofArgentina, and Satya Pal Talwar, former deputy governor of theReserve Bank of India.

“From my standpoint, India is no longeran option as an investment destination—it’s arequirement,” said James Melcher, founder ofBalestra. Melcher, who will head up the fund’sinvestment committee, declined to discuss thefund itself, citing the private nature of theinvestment offering.

The fund is targeted to institutional investors and has a

HARVEY PITT(continued from page 1)

Harvey Pitt

James Melcher

director at HFR, told AIN in June.Wilshire spokeswoman Kim Shepherd declined to comment.

—Mark Faro

WILSHIRE TO(continued from page 1)

$5 million investment minimum. Fees are 2% of assets and 20%of performance.

Pitt, now ceo of global business consulting firm KaloramaPartners, was traveling internationally and could not bereached for comment. –Nathaniel Baker

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