Bloomberg BRIEF - Pi Funds Hedge Funds Brief 12 … · launched a fund to invest in the founders’ share classes of early-stage hedge funds, ... “it’s a very exciting time for

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News, aNalysis aNd CommeNtary

york, Niederhoffer post may LossesHedge fund strategies managed by James Di-nan and Roy Niederhoffer had negative returns last month. page 2

regioNaL focus: asiaCitadel, CQS and other large firms are provid-ing refuge to managers whose funds struggled to raise money. page 3

from the miNutesNew Mexico may optimize its portable alpha hedge fund portfolio. page 4

market caLLsJohn Thaler reduces exposure to consumer stocks, Brevan Howard bets on CMBS. page 5

13f foreNsics: tripadvisor iNc.Hedge funds led by by Viking Global were net buyers of the online travel research company’s shares in the first quarter. page 6

sec may restrict jobs act adverts The U.S. regulator may weigh restrictions on how hedge funds and others solicit business under the JOBS Act. page 7

over the hedgeMayfair rents hit their highest level in three years, Richard Chilton attends New York Bo-tanical Gardens ball. page 8

caLeNdarpage 11

spotLightGrandmaster Capital Management Founder Patrick Wolff discusses his views on China and how these have affected his portfolio. page 12

BY KellY BiTLarch Lane advisors LLc, the $1.4 billion Rye Brook, New York-based firm, has

launched a fund to invest in the founders’ share classes of early-stage hedge funds, according to President and Chief Operating Officer david katz.

larch lane started the fund on May 1 to allocate to new hedge funds that are offering discounted fees for their earliest investors in what’s known as a founders’ share class, Katz said in a telephone interview. The firm aims to invest in 10 to 15 funds in this man-ner, Katz said. He declined to say how many slots have been filled.

“We’re taking meetings – we have a robust pipeline of managers,” he said. “There’s always room for very high quality managers in the portfolio.”

The strategy is the first of its kind, according to daniel celeghin, a partner at casey Quirk & associates LLc, a Darien, Connecticut-based firm that advises asset manag-ers. “A founder share class fund of hedge funds is unique, although we have seen some funds of hedge funds successfully extract meaningfully lower fees from their underlying managers, which replicates some of the value of a founder share class,” Celeghin said.

larch lane’s allocations to managers depend on how much is raised for the founders’ share class fund. Katz declined to say how much it had raised in assets or commitments.

Hedge funds are offering on average a 1.5 percent management fee and 15 percent performance fee to founders’ share class investors, with some variations, Katz said. early-stage funds tend to outperform their more well-established peers, Katz said. Hedge funds with more than $5 billion in assets attracted the biggest share of investor capital in the first quarter, with $18.3 billion in net deposits, according to Chicago-based Hedge Fund Research inc. Those with less than that amount garnered almost $2 billion.

larch lane is searching for “very high-quality managers who have the right pedigree and right experience,” Katz said. The firm is considering all strategies.

“it’s a very exciting time for this because there’s so much high-quality, experienced tal-ent who are starting their own funds,” he said. “To see this trend of fees coming down, it says a lot about what’s going on in the industry.”

last year 1,113 hedge funds were launched, compared to 935 in 2010 and 784 in 2009, according to HFR.

larch lane, which was founded in 1999, provides customized and commingled alter-natives portfolios, emphasizing early-stage investing through its hedge fund seeding program and funds of hedge funds.

larch lane has completed 26 hedge fund seeding deals since 2001, amounting to $3.7 billion.

Larch Lane Starts Founders’ Share Class Fund

InStItutIon ALLoCAtIon SeArCh SpeCIFICS mAnAger requIrementS/rFp InFormAtIon

asset services Company N/a oklahoma City-based consultant seeks long/short funds of hedge funds for client allocations. Prefers smaller funds.

Five-year track record preferred. see story, page 4, for additional information.

los angeles City employees retirement system $275 million two high-yield fixed-income strategies are sought that invest

at least 85 percent in debt of public U.s. companies.Five-year track record, $50 million in strategy. rFP available on consultant’s website: http://bit.ly/mzB5Ji

Kentucky retirement systems N/a “absolute and real return consultant” sought by public pension. rFP available online: http://bit.ly/Ka503F

new mAndAteS

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returnS In BrIeF ■ york capital management Lp, the New York-based fund run by james dinan,

posted a 3.2 percent May decline in its $5 billion York Multi-Strategy fund, paring yearly gains to 4.2 percent, according to an update to investors obtained by Bloom-

berg. The York Credit Opportunities Fund, which has $3.9 billion in assets, fell 1.8 percent last month and is up 8 percent this year. The $2 billion York european Opportuni-ties Fund decreased 2 percent in May and climbed 4.4 percent in 2012. The York Total Return fund, with $1.5 billion in assets, declined 3.2 percent in May and advanced 4.8 percent in the first five months of the year. The $470 million York Asian Opportunities Fund slumped 3.1 percent in May and gained 1.2 percent this year. The York Select fund, with $900 million, dropped 11 percent in May and 0.9 percent this year. The York european Focus Fund, with $550 mil-lion, declined 2.7 percent in May and rose 6.5 percent in the first five months of the year. The York Global Value

Partners fund, with $310 million, fell 9.8 percent last month and has gained 20 basis points in 2012.

■ r.g. Niederhoffer capital management inc. posted a 3.6 percent May decline in its $455 million Diversified Program, bringing yearly losses to 10 percent, according to a performance update obtained by Bloomberg. The Negative Correlation Program, with $18 million in assets, was up 2.9 percent last month to narrow its 2012 drawdown to 8.4 percent. The Optimal Alpha Program, with $7 million in assets, was down 6.9 percent in May and is off 7.6 percent this year. The TrendHedge Program, which has $22 million, declined 7 percent in May and 7.1 percent in the first five months of the year. The iHedge Program, which has $4 million in assets, slumped 8.4 percent last month and 10 percent in 2012. roy Niederhoffer is the firm’s president and founder.

■ sprott asset management Lp posted a 4.4 percent gain this month through June 8, paring year-to-date declines to 19 percent, according to a person familiar with the matter, who asked not to be identified because the information is private. Sprott Asset Management has $1.5 billion in its hedge fund strategies and was founded by eric sprott. The firm declined to comment on the returns.

■ visium asset management, the $3.5 billion fund run by jacob gottlieb, posted a 1.2 percent May gain in its Visium Balanced Fund, bringing yearly returns to 5.1 per-cent, according to an e-mailed update to investors that was obtained by Bloomberg. The Visium institutional Partners Fund climbed 1.2 percent last month and 3.2 per-cent this year. Visium Credit Opportunities Fund advanced 0.3 percent in May and 1.9 percent in 2012. Visium Global Fund increased 0.9 percent last month and 7 percent this year. Visium Tax Alpha Fund declined 2 percent in May and gained 2.5 percent in the first five months of 2012. Visium Catalyst event Driven Fund fell 4.4 percent last month, dropping year-to-date returns to -0.9 percent. Visium Catalyst Credit Fund slumped 1.8 percent in May and is up 3 percent in 2012.

■ Lyford group international’s Global Macro Master Fund gained 5.2 percent last month to bring year-to-date returns to 1.3 percent, according to its monthly letter to investors, a copy of which was obtained by Bloomberg. The fund, managed by samer Nsouli, profited on its two major themes of sluggish global economic growth and weakness in europe.

■ pamLi capital management LLc’s $325 million PAMli Global Credit Strategies lP returned 1.1 percent last month and 1.6 percent this year, according to a perfor-mance estimate e-mailed to investors. The fund is managed by faisal syed.

– Kelly Bit and Nathaniel Baker

For this week’s Performance Snapshot, featuring multi-strategy hedge funds, see page 9.

“I think China is a gigantic investment bubble. I believe it has to break, and although I don’t know how or when, it looks to me like it’s breaking now.”

— GrandMaster Capital Management Founder Patrick Wolff. See “Spotlight,”

page 12.

quote oF the week

James Dinan

06.12.12 www.bloombergbriefs.com Bloomberg Brief | Hedge Funds 2

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BY Bei HU AND TOMOKO YAMAzAKicitadel LLc and cQs (u.k.) LLp are

among global hedge funds providing ref-uge to managers in Asia as smaller firms struggle to raise money.

agus tandiono returned to Citadel in January following the closure of a fund he managed, said a person with knowledge of the move. sanjiv bhatia joined CQS after winding down his Hong Kong-based fund in December.

investors directed almost 80 percent of new capital to funds overseeing more than $5 billion in the 15 months to March, ac-cording to hedge fund research inc.

“Unless you get to $100 million pretty early on, it’s very hard now to survive,” said richard johnston, Hong Kong-based Asia head of albourne partners Ltd. “You’re better off working at a big multistrategy fund or platform manager.”

Of 308 Asian hedge funds started since

2009, 74 percent have failed to boost assets “significantly,” according to eureka-hedge pte. Of those funds, 51 have been liquidated, according to the Singapore-based research firm.

Direct allocations from institutions now account for a larger share of inflows and they tend to prefer established funds, said max gottschalk, co-founder of gottex fund management holdings Ltd.

Tandiono started the first equity fund for income partners asset manage-ment Ltd. in July 2009. The $25 million fund closed mid-2011 because “it was very difficult to raise money,” said fran-cis tjia, managing partner at the Hong Kong-based firm. Tandiono, 40, first joined Citadel in early 2006 as an analyst and became the head of Asia equities later that year. He left in 2008 when the Chica-go-based firm reorganized in the region.

Bhatia, a former trader and risk man-

ager at goldman sachs group inc., left Minneapolis-based deephaven capital management LLc in July 2008 to start isometric investment Advisors ltd. Bhatia, 41, said he closed the fund in December after frm capital advisors Ltd., which accounted for about 80 percent of his fund, decided to invest elsewhere.

Other managers seeking sanctuary at big firms include anthony correa, who in April 2011 closed Black’s link Capital ltd., the Hong Kong-based fund he co-found-ed. Correa is now heading Asia operations at taconic capital advisors Lp, said a person with knowledge of his position.

hani abuali in November joined mount kellett capital management LLc as a Hong Kong-based managing director focused on its Asian equity hedge fund, said jon fiorello, New York-based chief operating officer of the $7 billion firm set up by two former Goldman executives.

Citadel, CqS hire Asia managers as Small Funds Buckle

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mAndAteSAsset Services Searches for Long/Short Funds of Funds

asset services company, the Oklahoma City-based investment consultant with about $4 billion in assets under advisement, is searching for long/short funds of hedge funds for client allocations, according to Vice President peter junkin.

While the firm’s clients will mostly make allocations of $1 million or more, there is no “typical” size of an initial allocation, as it depends on the client’s assets under manage-ment and the nature of the portfolio, Junkin said.

Asset Services is not currently searching for a specific number of funds or to make deployments during a particular time period, he said. “We treat each client as unique and consider the circumstances and environment at the time,” Junkin said.

The firm generally prefers smaller hedge funds, not “big name firms,” he said. Fund size and liquidity terms will depend on the nature of the allocation and the client, Junkin said. The firm prefers managers with at least five years’ worth of track record.

—Kelly Bit

FundrAISIngSegantii Said to Curb Inflows After Asset expansion

segantii capital management Ltd., a Hong Kong hedge fund manager led by a former hsbc holdings plc trader, stopped taking money from investors from this month after assets swelled 38 percent this year, said two people with knowledge of the matter.

The company will continue to talk with new and existing investors on how to meet demand for the $620 million Segantii Asia-Pacific equity Multi-strategy Fund, said the people, who asked not to be identified as the information is private. Chief investment Of-ficer simon sadler, a former head of Asian equity trading for HSBC’s regional securities unit, declined to comment.

Segantii decided to halt inflows into the fund, which has produced positive annual returns since inception in December 2007, to smooth asset growth and maintain perfor-mance, said the people. There are still unmet subscriptions, they added.

The fund began the year with $449 million under management. it had its best annual return last year, gaining 41 percent, according to a newsletter to investors seen by Bloom-berg. The fund returned 3.1 percent this year through May.

—Bei Hu

Clive plans Internal hedge Fund for under-30 tradersclive capital management LLp is setting up a firm for two traders that allows them to

generate their own fees while still investing for the london-based hedge fund, two people with knowledge of the situation said.

tristan almada, 26, and Nicolas rossi, 25, have formed a company called taurosso capital LLp in london, said the people, who declined to be identified as the firm is private. Taurosso has the same address as Clive and its partners include chris Levett, Clive’s founder, according to a January filing with the U.K.’s Companies House that gave the founders’ dates of birth.

Almada, reached by phone, said he and Rossi weren’t commenting and referred ques-tions to Clive spokeswoman elizabeth Holstein, who also declined to comment.

Almada registered as an employee at Clive with the U.K. Financial Services Authority in 2010, according to the regulator’s website. He hasn’t held any other finance jobs in Britain that required FSA registration. Rossi also registered as a Clive employee with the FSA in 2010. The FSA’s website doesn’t show an entry for Taurosso.

—Jesse Westbrook and Matthew Brown

BrIeF exCLuSIveS

public employees retirement association of New mexico will discuss optimizing its portable al-pha hedge fund portfolio at today’s investment committee meeting, according to the agenda.

http://bit.ly/JXASzf

Bakersfield, California-based kern county employees’ retirement association is due to approve an agreement with Albourne America llC for hedge fund consulting ser-vices with annual fees of $400,000 at its board meeting tomorrow.

http://bit.ly/OkEcIs

ohio police & fire pension fund accepted the investment man-ager rating recommendation for investcorp at its May meeting. The motion passed “unanimously.”

http://bit.ly/LWHVbg

NePC llC has agreed to adjust the fees it charges the City of San Jose’s police and fire depart-ment retirement plan “to provide a credit for the hedge fund portion of the portfolio.”

http://bit.ly/N4YtVB

“information items” at the sewage & Water board of New orleans’s pension committee meeting last week included equitas Capital Advisors and Prisma Capital Partners.

http://bit.ly/JPsd6D

indiana’s state police pension trust is “still in the process of evaluating the unexpectedly large number of responses” to its search for a fund of hedge funds manager that was launched in February.

http://1.usa.gov/NzQtsl

From the mInuteS



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mArket CALLS items may be submitted to [email protected] for consideration

thaler’s JAt ‘to Allocate Away From Consumer’john a. thaler’s jat capital management Lp reduced its exposure to consumer

stocks after they contributed to a 17 percent loss this year, according to two people famil-iar with the matter.

New York-based JAT, which has $2.3 billion in assets, plans to focus more on technol-ogy, media and telecommunications companies, said the people.

“We have made the decision to allocate away from consumer going forward,” Thaler said in a letter to investors dated May 15, a copy of which was obtained by Bloomberg.

JAT had allocated about 28 percent of its assets to consumer companies, which contributed a 9.1 percent loss as of April 1, according to the letter. The firm has since reduced that portion to less than 10 percent of the portfolio and reallocated the money to technology, media and telecommunications, the people said.

—Kelly Bit

Brevan howard Sees 60 percent gains From AJ Bondsbrevan howard asset management LLp is seeking returns of as much as 60 percent

within two years by buying so-called AJ commercial mortgage bonds, according to people familiar with the matter.

Many of the bonds have been cut to junk after being assigned AAA grades at issuance, said the people. Brevan Howard created a CMBS fund that may be as large as $1 billion, probably lasting through 2014, and will return 20 percent to 60 percent, the Pennsylva-nia Public School employees’ Retirement System said in an April memorandum on its website, recommending a $200 million investment with the manager. While the fund will invest in securities created from 2005 to 2007, when underwriting standards slipped and issuance soared, it can buy from other years, one of the people said.

A benchmark gauge of AJ prices has declined to 57.8 cents on the dollar from 73.8 cents in May 2011, according to markit group Ltd. data. it dropped to 54 cents last month, the lowest level this year.

Brevan Howard’s credit fund is headed by david Warren, the former head of structured credit trading at morgan stanley.

—Katherine Burton, Jesse Westbrook and Sarah Mulholland

Four elements ‘no Longer Short energy’four elements capital pte Ltd.’s earth element Fund, managed by Singapore-based

Lionel semonin, has closed out most of its short exposure to energy commodities, ac-cording to a monthly report sent to investors and obtained by Bloomberg News.

“The earth element Fund is no longer short energy,” Semonin, a former managing director of bNp paribas sa’s commodity investor group, said yesterday by phone. “We believe that the expected destruction of energy consumption has probably largely been priced in. The fund is well-positioned for a rally in gold and overall precious metals com-plex for the second half of this year.”

—Chanyaporn Chanjaroen and Matthew Brown

rickards Says China’s Banks may have to write down Loansjames rickards, senior managing director with tangent capital partners in New

York, said Chinese banks may have to write down loans made for infrastructure projects that may not be repaid.

“They’ve spent in U.S. dollar equivalents over a trillion dollars in their stimulus program,” Rickards said on Bloomberg Television’s “Money Moves” program. “At the end of the day the provincial officials are sure Beijing will come and bail them out the same way europe just bailed out Spanish banks,” he said. “They’re really between a rock and a hard place.”

—Kelly Bit and Deirdre Bolton

corriente advisors LLc’s mark hart late last may said he was wagering on a decline in the chinese yuan by buying put op-tions. hart, chairman of the fort Worth, texas-based firm, said china’s growth was fueled by a credit bubble, and that rising inflation would bring the boom to an end. “there are lots of ways to play china, but this is the most mispriced,” hart told the audience at the 16th annual ira sohn investment conference in New york. “there are signs of a bubble in china everywhere,” he said, adding that a bust would be worse than the 1997 asian currency crisis (bloomberg brief, may 31, 2011).–While a bust reminiscent of 1997 has not happened in the past year, the Chinese currency has dropped by 1.7 percent versus the U.S. dollar during that time period. On March 31, it completed its first quarterly decline since December 2009 as Premier Wen Jiabao set the nation’s annual economic growth target at the lowest level in seven years. The yuan dropped to a five-year low of 6.2774 on May 1 as europe’s debt crisis sapped demand for Chinese exports. Over the past several weeks it has recovered after data showing manufacturing expanded at the fastest pace in a year damped speculation the central bank would relax monetary policy. The yuan was trading around 6.37 yesterday.

—Nathaniel E. Baker

6.25

6.3

6.35

6.4

6.45

6.5

5/1/2011 8/1/2011 11/1/2011 2/1/2012 5/1/2012

Yuan

Source: Bloomberg

Yuan versus USD


mArket CALLS, revISIted


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Hedge funds were net buyers of tripadvisor inc. in the first quarter, adding more than 24 million shares on aggregate, ac-cording to Bloomberg data. The purchases, worth almost $1.1 billion on March 30, made the Newton, Massachusetts-based company the quarter’s 20th-most popular hedge fund stock.

viking global investors Lp became the company’s second-biggest shareholder behind liberty Media Corp. with its pur-chase of 10.4 million shares during the quarter. Seven of the quarter’s 10 biggest purchasers were hedge funds. Still, some

hedge funds also liquidated their holdings in the three months ending March 30; scout capital management LLc sold off a 1.7 million share-sized position and jana partners LLc exited its stake of 910,607 shares.

Tripadvisor has gained more than 56 percent through yester-day’s close since spinning off from expedia.com in December. last month the online travel research company reported first quarter profit and sales that topped analysts’ estimates.


13F ForenSICS: trIpAdvISor InC.

Largest hedge fund shareholders as of june 30

Fund Amount heLd

vALue on mArCh 30*

vALue on June 11*

LAteSt ChAnge (ShAreS)

perCent oF CompAny

perCent oF portFoLIo

ViKiNG GloBal iNVestors lP 10,441,404 372 448 10,441,404 8.6 3.0

PeNNaNt CaPital maNaGemeNt llC 5,120,850 183 220 -875,000 4.2 4.1

BlUe ridGe CaPital llC 4,675,000 167 201 4,675,000 3.9 2.8

lUXor CaPital GroUP lP 3,229,744 115 139 3,229,744 2.7 8.2

Par CaPital maNaGemeNt iNC 2,980,650 106 128 0 2.5 3.4

aNtiPodeaN adVisors llC 2,836,149 101 122 2,292,149 2.3 18.5

BridGer maNaGemeNt llC 2,000,000 71 86 2,000,000 1.7 5.0

loNe PiNe CaPital llC 1,865,613 67 80 1,865,613 1.5 0.4

ColUmBUs CirCle iNVestors 1,557,586 56 67 959,199 1.3 0.4

HoPlite CaPital maNaGemeNt 1,488,473 53 64 1,488,473 1.2 3.2

soroBaN CaPital PartNers llC 1,225,000 44 53 1,225,000 1.0 2.6

matriX CaPital maNaGemeNt 850,000 30 36 772,000 0.7 7.4

HiGHside CaPital maNaGemeNt lP 726,200 26 31 726,200 0.6 2.0

marBle arCH iNVestmeNts lP 610,000 22 26 610,000 0.5 2.6

* $millions



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Hedge fund assets could more than double by 2016 as institutional inves-tors “are increasingly embracing the risk management and diversification” offered by the asset class, accord-ing to citigroup inc.’s third annual survey of industry trends. “institutional investment in Hedge Funds: evolving investor Portfolio Construction Drives Product Divergence” found institutions are basing allocation decisions “on risk budgets rather than dollar-weighted” metrics.

http://citi.us/MzJQ68

Roughly half of european institutional investors plan to invest fresh capital into hedge funds this year, accord-ing to preqin’s monthly “Hedge Fund Spotlight” report. Nearly one-fifth of these “indicated that they will commit over 200 million euros,” Preqin said, citing interviews with more than 50 institutional investors active in hedge funds. The U.K. remains the “european hub” of hedge fund investing, represent-ing around 39 percent of the continent’s institutional investors, followed by Swit-zerland with 22 percent, the report said.

http://bit.ly/KRlEA3

So-called “liquid CTA/macro funds” have gained market share from hedge funds, according to a survey by citi-group inc.’s Prime Finance unit. The liquid CTA/macro funds, which in 2000 accounted for 7 percent of a combined pool of CTAs and hedge funds, rose to 14 percent by 2011, according to the report “Moving into the Mainstream: liq-uid CTA/Macro Strategies & their Role in Providing Portfolio Diversification.”

http://bit.ly/Lvl3nf’

Hedge funds have performed “very well,” leverage is “well within sensible limits” and “investors are happy with their hedge fund allocations,” accord-ing to a report by momentum global investment management. “Are fund of hedge funds still the black sheep of the asset management industry?” was written by john caulfield, the chief investment officer of Momentum’s fund of hedge funds.

http://bit.ly/Lceu6g

reguLAtory/CompLIAnCe

SeC may restrict hedge Fund Ads under JoBS ActThe U.S. Securities and exchange Commission may weigh restrictions on how com-

panies including hedge funds and private-equity funds can solicit business from large investors under the Jumpstart Our Business Startups Act.

“Regulating the forms of communication is a way to enhance investor protections,” Lona Nallengara, a deputy director in the SeC division of corporation finance, said Friday at an SeC Advisory Committee on Small and emerging Companies meeting.

Title ii of the JOBS Act eliminates a longstanding ban on general solicitation and adver-tising by firms that seek to sell to accredited investors. The change would allow managers of private funds to solicit business through advertising.

“There was discussion around restricting forms of communication,” the SeC’s Nallen-gara said. “it didn’t end up in the final form of Title ii. Our commission will in the end make a determination of whether that’s part of the contemplated Title ii.”

The SeC has 90 days after the date of enactment, which was April 5, to “revise” the Title ii rules, which will be open for public comment before they are adopted.

– Kelly Bit

ex-trader Sues pamplona Capital on $3.1 million BonusA former trader at pamplona capital management LLp sued the london-based firm

saying his 2 million-pound ($3.1 million) bonus wasn’t as much as he was promised.sheil aggarwal, who worked at the Pamplona Credit Opportunities Fund run by yves

Leysen, said in a U.K. lawsuit that part of his 2009 bonus was deferred to limit taxes. After resigning from the firm in 2010, he wasn’t paid the deferred 1.3 million pounds, ac-cording to court papers filed in March and made public last week.

Pamplona’s lawyers said in their own court filing in May, also made public last week, that the deferred bonus was only intended for those who continued to work at the fund.

The 2 million pounds he received “was not just rational, but was generous and was intended to retain and motivate the claimant,” they wrote.

Pamplona, which manages $6.5 billion, was founded in 2004 by former alfa bank Chief executive Officer alex knaster.

Aggarwal, a specialist trader in asset-backed securities with a salary of 150,000 pounds, claimed his contribution to the fund was ignored, while leysen’s allocation of profits to himself and other employees was “arbitrary and driven by self-interest.”

The Credit Opportunities Fund reaped profits of about 74 million euros in 2009 and leysen made the major investment decisions, Pamplona said in its court papers. leysen e-mailed Aggarwal at the end of the year explaining how profits would be shared.

“My role is not that of a manager overseeing a prop trader, but to be the prop trader, supported and helped by all of you,” leysen wrote, according to court filing.

– Kit Chellel

Credit Index and rate Swaps will Be 1st Cleared: CFtCinterest rate and credit index swaps will be the first derivatives to face clearing require-

ments this year under the Dodd-Frank Act, said U.S. Commodity Futures Trading Com-mission chairman gary gensler.

The agency’s staff is preparing recommendations to require clearing of fixed-to-floating interest rate swaps as well as indexes of North American investment grade and high-yield credit swaps, Gensler said in a speech prepared for the Sandler O’Neill Global exchange and Brokerage Conference in New York.

The CFTC’s clearing determinations will probably also include basis swaps and forward rate agreements. Overnight index swaps in U.S. dollars, euros, British pounds and Japa-nese yen will probably also face the clearing determination, Gensler said. Some euro-pean iTraxx, high volatility and crossover iTraxx indexes will as well.

– Silla Brush

reSeArCh round-up



1 2 3 4 5 6 7 8 9 10 11 12

■ paul marshall, founder of marshall Wace LLp, the london-based hedge fund, criticized banks, credit rating agencies and politicians including Hank Paulson, saying the financial sector “has become much too big,” Financial News reported today.

The event, hosted by the St Paul’s in-stitute, a religious think tank in london, was held at St Paul’s Cathedral and was chaired by Ken Costa, former chairman of lazard international, with the london Connection, the Bishop of london’s initiative to look at how to make finance more ethical after the Occupy protests.

—Kelly Bit

■ eddie Lampert is relocating esL investments inc. to Miami, according to a regulatory filing today. The move followed his purchase earlier this year of a seven-bedroom mansion in Florida’s Biscayne Bay for almost $40 million. eSl President William crowley will not make the move “for personal reasons,” according to Steve lipin, a spokesman for eSl.

—Miles Weiss

■ richard L. chilton jr., chief executive and chief investment officer of chilton investment co., and his wife Maureen attended the New York Botanical Gar-dens’ Conservatory Ball last week. The event gathered 670 guests and raised $1.7 million for the nature oasis that is open to the public almost every day of the year.

—Amanda Gordon

■ The hedge fund association ap-pointed adam j. steinberg, a financial communications consultant in Beijing, as the new director of its China chap-ter, according to a statement. The HFA made the appointment as it recognizes the “growing importance” of hedge funds invested in the region, the association said in the statement. About 658 hedge funds were listed in China as of April, half of which were formed since Janu-ary 2010, according to PerTrac, the HFA said. The HFA has more than 9,500 hedge fund members that manage more than $2 trillion in assets, in addition to investors and industry service providers.

—Kelly Bit

■ Willie Nelson will headline a private fundraiser for China Care Foundation, a charity established by bridgewater associates Lp Founder ray dalio’s son Matt, the Greenwich Time reported. The Dixie Chicks will open for Nelson at the invitation-only event, which takes place at Belle Haven Club in Greenwich, Connecti-cut on June 23, the newspaper said.


■ Warren buffett’s annual lunch auction set a record for a third straight year, rais-ing $3,456,789 after attracting 106 bids. The winner, who wasn’t identified, and seven companions get to dine with Buffett at the Smith & Wollensky steakhouse in New York. The event has brought in more than $14.6 million in the past 13 years for Glide, which serves meals to the needy and runs a church in San Francisco’s blighted Tenderloin district. last year’s re-cord take was $2.63 million. Past auction winners include hedge fund managers david einhorn and ted Weschler, who subsequently was hired by Buffett after his record-setting bids in 2010 and 2011.

—Vivek Shankar

over the hedge

hedge funds get squeezed in mayfairBY SiMON PACKARD

landlords in Mayfair and St. James’s, two of london’s most expensive neighborhoods, are exploiting a shrinking supply of new or refurbished office space to charge hedge funds and other financial firms the highest rents in three years.

Offices are being converted into residences costing 2,000 pounds ($3,100) a square foot or more as demand surges from foreign buyers seeking luxury homes in central london. A shortage of financing for new development and restrictions on high-rise projects add to the squeeze on commercial space.

london, europe’s main center for hedge funds, has attracted tenants willing to pay high rates for prestigious offices from which to court customers of the private banks based nearby. Owners face the choice of keeping buildings, many of them former houses, as offices or cashing in on a bidding war that has driven up luxury-home prices in the capital by 37 percent in the past five years, according to Knight Frank llP.

Prime office vacancies in Mayfair and its southern neighbor, St. James’s, are the lowest in almost three years at 3.4 percent. Net effective rents, which include incentives such as rent-free periods, rose to 82.33 pounds a square foot for Grade A space, broker Jones lang laSalle inc. estimates. That’s the highest since the first quarter of 2009.

Mayfair and St. James’s were transformed to office districts

after World War ii, when bombing destroyed much of the City of london financial center. The areas were the world’s second-most expensive office market for Grade A space last year and held first place the year before, according to a ranking of central business districts compiled by Knight Frank. Hong Kong was the most expensive in 2011. Manhattan was 16th.

Rents for the best offices in the london neighborhoods peaked at 107 pounds a foot in the first half of 2008. That sank to 60 pounds in the two years through June 2010 as the credit crisis made firms reluctant to spend on space. Since then, net effective rents have rallied by 37 percent, Jones lang data show. egerton capital Lp signed a lease in the past 12 months for more than 100 pounds a square foot.

A 1730s house on Upper Grosvenor Street used as offices was sold for 18 million pounds earlier this year, exceeding the asking price by 22 percent, because of its potential as a residential development project, said Peter Wetherell, owner of specialist Mayfair broker Wetherell & Co.

As a rental office investment, the building would have fetched less than 10 million pounds because staircases, kitchens and bathrooms don’t generate an income and so aren’t included in its investment value, he said.

Permal Group, the fund of hedge-funds unit of Legg mason inc., agreed in September 2007 to pay a record 140 pounds a square foot to lease the top floor of an office on St. James’s Square.



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FIrm Fund mAnAger InCeptIon dAte

ShArpe rAtIo

return %

CtC Fund management llC CtC Fund llC team managed 3/17/2003 3.4 35.9

tranen Capital ltd tranen Capital alternative investment Fund ltd Kenneth landgaard 6/30/2008 3.6 19.3

Capital Fund management sa stratus Fund limited-Class C-Usd 1.5 leverage Fund team managed 12/1/2003 1.5 14.1

JGP Global Gestao de recursos ltda Nextar Fund-Global Class-B andre Jakurski 10/13/1998 3.1 13.8

ram oNe aB ram oNe sven Nyman 10/31/2002 1.6 12.7

securis investment Partners llP securis i Fund-a Usd robert Procter 9/30/2005 3.2 10.5

Cornerstone acquisition & management Co llC Caritas royalties Fund (Bermuda) ltd derren Geiger 6/30/2004 3.7 9.9

Pi Financial management Pi sPC-Pi emerging markets sP ii Jonny Kaye 2/1/2009 2.8 9.8

Phillips Hager & North investment management ltd Phillips Hager & North absolute return Fund Hanif mamdani 9/30/2002 1.5 8.5

aristeia Capital llC aristeia master lP-U anthony Frascella 8/1/1997 1.6 8.1

For Sharpe ratio CalCulation Methodology type FldS Sharpe <go> on BlooMBerg. “riSk Free rateS” idoC 2047613 <go>

by one-year returns

A look at some of the best-performing multi-strategy hedge funds that report to Bloomberg data. Only funds with $50 million or more under management that have reported performance through at least April 30 are included. For questions please contact Anibal Arrascue at [email protected]

perFormAnCe SnApShot: muLtI-StrAtegy hedge FundS

by five-year annualized returns

FIrm Fund mAnAger InCeptIon dAte

ShArpe rAtIo

return %

Phalanx Capital management llC Phalanx Japan australasia multi-strategy (U.s.) Fund lP Christopher mcGuire 3/31/2005 2.6 31.8

CtC Fund management llC CtC Fund llC team managed 3/17/2003 3.4 29.3

CQs UK llP CQs directional opportunities Feeder Fund limited michael Hintze 8/1/2005 1.1 18.4

Constellation Capital management llC andromeda Global Credit Partners ltd shahriar shahida 8/31/1999 0.9 15.9

Capital Fund management sa stratus Fund limited-Class C-Usd 1.5 leverage Fund team managed 12/1/2003 1.2 15.4

Phillips Hager & North investment management ltd Phillips Hager & North absolute return Fund Hanif mamdani 9/30/2002 1.8 14.9

JGP Global Gestao de recursos ltda Brax Fund-Class a-real Class arlindo raggio Vergacas 7/5/2006 0.8 14.8

Pine river Capital management lP Pine river Fund ltd-B1 aaron yeary 6/1/2002 1.0 14.7

whitebox advisors llC whitebox multi-strategy Fund lP andrew redleaf 1/1/2002 1.0 13.7

Cornerstone acquisition & management Co llC Caritas royalties Fund (Bermuda) ltd derren Geiger 6/30/2004 2.6 13.2



1 2 3 4 5 6 7 8 9 10 11 12

hedge FundS Added to BLoomBerg thIS weekThe following hedge funds were added to Bloomberg’s database this week. Access the Hedge Fund Database Portal by typing HFND

<GO> on your Bloomberg Terminal. To view U.S. hedge fund managers, users must fill out an Accredited investor Form (Option 13).

tICker BLoomBerg Id Fund mAnAger

mAnAgement CompAny StrAtegy mAnAger

LoCAtIonInCeptIon

dAte AdmInIStrAtor

eaPJPym Ky BBG0032dZ3Q9 team maNaGed epic Partners investments Co ltd long/short eq Japan 6/29/2012 daiwa europe Fund

managers ireland ltd

GlGmCar Ky BBG0032JyJC7 driss BeN-BraHim GlG Partners lP multi-strategy U.K. 6/1/2012 BNy mellon Fund

services ireland ltd

NorsmCP Ky BBG003280ZV1 aleXaNder m sasso "aleX" Hesperian Capital management ltd long Bias eq Canada 3/12/2004 Front street Private

Bank Barbados ltd

iBmlBFa Ky BBG002Z0J4C4 team maNaGed itau Usa asset management inc long Bias eq U.s. 6/1/2012 state street Cayman

trust Co ltd

lsCrlsF Us BBG002VK9sV1 mattHew J eaGaN loomis sayles & Co lP Fixed income arb U.s. 10/14/2008 Citi Hedge Fund

services inc

moaBPlP Us BBG000P778Z3 miCHael m. rotHeNBerG moab Capital Partners llC distressed sec U.s. 4/1/2006 deutsche Bank alternative

Fund services ltd

mattHFB Vi BBG003217sm5 team maNaGed Nemo asset management ltd long Bias eq B.V.i. 5/18/2012 al-Per solutions ltd

PersCom Us BBG00324G665 ilaN raaB Persistix Capital management llC eq statistical arb U.s. 2/1/2012 Conifer Fund services ltd

ForUmCP Us BBG0032855r7 JoHN a staley iV staley Capital advisers inc long/short eq U.s. 2/1/2007 staley Capital

advisers inc/Usa

tCaGlGG Ky BBG0032QKPm1 roBert Press tCa Fund management Group Fi directional U.K. 4/1/2011 Caledonian Fund

services ltd

tasFwCl Ky BBG0032Vr878 team maNaGed winnington Capital ltd long/short eq Hong Kong 5/24/2012 Credit suisse administration

services Cayman ltd

For Web News on Hedge Managers on Bloomberg click {STNI HEDGEMANAGERSWEB <go>}



1 2 3 4 5 6 7 8 9 10 11 12

dAte event FeAturIng LoCAtIon ContACt / regIStrAtIon

June 14 Bloomberg asset management summit

robert doll, Blackrock; markus schomer, PineBridge; John taylor, FX Concepts. state room, Boston http://bit.ly/Joubsa

June 14, 5pm

Hedge Fund association Northeast Chapter symposium

Keynote speaker Harvey Pitt; marita wein, alternative investment Group.

l'escale, Greenwich, Connecticut http://bit.ly/Jr5iZy

June 18-20 Gaim international 2012 Peter thiel; Hugh Hendry, ecclectica;

Patric de Gentile-williams, Frm.the Grimaldi Forum,

monaco http://bit.ly/JafBFo

June 20, 12pm

Jefferies Capital introduction's 3 manager luncheon

Jim Hamer, Hamer Fund; Paul rabar, rabar market research; anne sophie van royen,

modus Quantitative advisors.

New york (exact location provided to

attendees)

laryssa temnycky 212.778.8391 or [email protected]

June 20, 5:30pm

Caia New york educational event: "investing in alternative alternatives:

wine, diamonds and art."

Panelists Javier lumbreras, artemundi Global Fund; Claudio Ghisu, diamond asset advisors;

tim Clew, the wine trust.Club 101, New york http://bit.ly/KswVKQ

June 21, 8am

New york Hedge Fund roundtable monthly event

Jobs act impact on the iPo market. Keynote by david weild, Capital markets advisory Group

New york (location provided to attendees) www.newyorkhedgefundroundtable.org

June 21 Connecticut Hedge Fund associa-tion's Cio discussion

Ken Goodreau, employees' retirement system of rhode island, Carol mcFate, Xerox.

indian Harbor yacht Club, Greenwich http://bit.ly/JmCHVu

June 24, 2pm

CFa Beijing Hedge Fund Group's etF trading and arbitrage strategies dennis Chen, Harvest Funds. sunny Bay Coffee,

Beijing http://bit.ly/Kxyw7b

June 25-27 the trading show Chicago 2012 matthew Cushman, Citadel;

attilio meucci, Kepos Capital. Navy Pier, Chicago http://bit.ly/zcxjor

June 25-29 FundForum international 2012 Hugh willis, Bluebay asset management;

willie watt, martin Currie.the Grimaldi Forum,

monaco www.informaglobalevents.com

June 26 Credit suisse Commodities day New york

stephane Nicolas, Brevan Howard; Paul tour-adji; Bryan martin, N.J. division of investment.

Credit suisse offices, New york http://bit.ly/Jmy0aw

June 26 Kingsland Capital's tom liu memorial Golf outing

to benefit the tom liu memorial endowment Fund at the University of michigan.

Glenarbor Golf Club, Bedford Hills, New york

email [email protected] for more information

June 26 daP trading Capital introduction event investor roundtable session. Chicago (exact location

provided to attendees)andrew saunders,

[email protected]

July 9 informa's Hedge Fund startup Forum Jeroen tielman, imQ investment management; marcus storr, Feri institutional advisors.

london (exact location to be determined) http://bit.ly/iCvNBq

July 10 100 women in Hedge Fund's sparkle Party london

Vintage champagne toast to skillForce and private viewing of the crown jewels. Hm tower of london http://bit.ly/ibtmld

July 18 2nd annual delivering alpha Conference

Bill ackman, Cliff asness, Peter Briger, leon Cooperman.

the Pierre Hotel, New york www.deliveringalpha.com

July 19-20 Private investment Fund accounting & auditing Forum

industry tips, expert advice on back-office challenges.

Princeton Club, New york

save 15% with code FmP153; www.frallc.com

July 23-25 opal Financial Group's Family office & Private wealth management Forum

Complimentary for approved family offices, consultants or endowments and foundations.

Hyatt regency Newport, r.i. www.opalgroup.net

July 28 Hedge Funds Care's "Behind the Hedges" Cocktail Party

Hosted by New york young Professionals Com-mittee. open bar, hors d'oeuvres.

southampton social Club http://bit.ly/lwZiC2

July 30 5th annual Hedge Funds Care Connecticut Golf tournament rain date is august 6. Greenwich and Fairview

country clubs http://bit.ly/HmQwd4

July 30-31 Hedge Fund investment and operations Boot Camp

"Get the drill on everything you need to know about the complex world of hedge funds."

Princeton Club, New york

save 15% with code FmP153; www.frallc.com

aug. 14 Bloomberg Hedge Funds rioCarlos Hamilton Vasconcelos araujo, Banco Central do Brasil; roberto Castello Branco,

Vale; alan Gandelman, iCaP Brazil.rio de Janeiro www.bloomberglink.com/rio

CALendAr To submit an event email [email protected]



1 2 3 4 5 6 7 8 9 10 11 12

Q: can we talk about the name of your fund first? there’s a chess reference in there, right?a: The chess link is that i am actually a chess grandmaster and 20 years ago played chess professionally. i was U.S. chess champion in 1992 and 1995. That was a lot of fun but then i hung up my chess set and moved on to the business and finance world.

Q: What is your fund’s strategy?a: We are fundamental, long/short equity. We’re looking to buy good businesses cheap and to a lesser extent sell short not so good businesses that are expen-sive. We’re long biased. Having worked with Peter Thiel at Clarium Capital for five and a half years, i think the macro matters. That does not mean i’m top down thematic. it’s more that i think part of the fundamental analysis is the macro picture. The companies that we own and the com-panies that we’re short line up with our fundamental view of the world.

Q: What is this view, then?a: Since we launched a year and a half ago it’s been very much ‘Fortress America.’ For all our problems, and we’ve got plenty of problems, the U.S. has the best foreseeable macro fundamentals. We are on the other side of our financial crisis. europe is nowhere near turning the corner on its problems. At a mini-mum i am extremely nervous about the economic outlook for the next couple of years. More worrisome, the chance of a full-blown financial crisis is real. i’m extremely bearish on China. i think China is a gigantic investment bubble. i believe it has to break, and although i don’t know how or when, it looks to me like it’s breaking now. i don’t want anything that’s

levered to the global growth/commodities supercycle/emerging markets complex. All of that is in danger of crashing down with China at the center of it.

Q: how does that play itself out in your strategy?a: Without getting into individual stocks, i’d say on the long side what we like to own are high-quality businesses at attractive prices that for the most part do business in the U.S. There’s plenty of those. The U.S. is a big place. i want to minimize my earnings risk from a declin-ing european economy and from a crash in China. We have some shorts that are levered to the China/eM/commodities supercycle but we have plenty of old-fashioned, bottom-up shorts that have nothing to do with the macro.

Q: is it really possible to fully hedge exposure to china nowadays?a: it’s a big world. There are a lot of companies out there whose earnings are much more in the U.S. it’s not at all clear to me that a crashing Chinese economy is bad for the U.S. it’s clearly bad for some companies. But i think there’s a whole range of scenarios where the China growth engine sputters or crashes and it may not be bad at all for the U.S. economy. i would also argue that China has its thumb on the scale of rational pricing of a whole set of world resources. if i’m right that China is misallocating capital on a gigantic scale, then it follows that China is pushing up the price on a whole bunch of stuff that actually has a higher or better use outside of China. it’s

not bad for the rest of the world if those prices go down. Also, China’s financial system is very closed. it doesn’t seem likely that you’d get financial contagion if China’s banks suddenly have to realize a whole bunch of bad loans.

Q: it sounds like you believe de-cou-pling is possible?a: i think the coupling goes one way. China has tied its currency to the dollar. China imports U.S. monetary policy. There’s no question therefore that China is closely coupled to the U.S. through that link. What’s not at all clear to me is how it goes the other way.

Q: how far along are we in this china downturn and how does it play out?a: Whether it’s the drop in electricity production or commodities piling up or the fall in the property markets or the drop in measured inflation, it sure looks to me like things are really coming apart in China. The big question is can the government really give one more giant shot of adrena-line and get things going again? i’m skep-tical because once the property bubble breaks decisively, which looks like it’s hap-pening, it changes everybody’s behavior. it looks like we started 10 or 11 months ago and now are on this downward slide which could last a couple of years and be pretty dramatic. if you think of the U.S. housing bubble, it broke decisively in mid-2006 and took about a year to show through. it took two years for the banks to blow up. if China’s property bubble broke in Q3, which it certainly looks like, then we’re on the same trajectory.

patrick Wolff of grandmaster capital management LLc spoke to Bloomberg’s Nathaniel Baker about protecting his portfolio against a downturn in China. The San Francis-co-based long/short equity fund launched in January 2011 with a $50 million seed invest-ment from Peter Thiel.

SpotLIght

grandmaster Capital’s patrick wolff on the China downturn

Age: 44

education: Harvard University ‘97

professional Background: Two years in consulting, two years in Silicon Valley,

Capital One (2001-2005), Clarium Capital (2005-2011).

Family: Married with two children.

mentor: Four parts Warren Buffett, one part Peter Thiel.

Charitable work: Excellence in Investing for Children’s Causes Foundation



Documents

Bloomberg BRIEF - Pi Funds Hedge Funds Brief 12 … · launched a fund to invest in the founders’ share classes of early-stage hedge funds, ... “it’s a very exciting time for