CalPERS Investment ChiefTouts LBOs, Venture CapMark Anson, the cio of the $166 billionCalifornia Public EmployeesRetirement System, said that therewere opportunities in leveraged buyoutand venture capital funds.

See story, page 2

At Press TimeFormer Omega Official

Taps Prez 2

U.S. NewsBelay Capital Preps Fund 3Cadogan Hires Director

of Investments 3San Bernadino Selects Managers 3Former NYMEX Prez

Considers Fund 4

European NewsInterest In Global Macro Wanes 6Copenhagen Develops

Currency Fund 6Gartmore Taps INVESCO Official 7Dutch Firm Readies Fund 7

News From Other PortsSingapore Start-Up Readies Fund 7Korean Firm Preps Fund of Funds 7

DepartmentsSearch & Hire Directory 9Hedge Fund Habitats 11

CONVERTIBLE ARBITRAGE MANAGERS TAKE DETOURS Convertible arbitrage funds are employing a number of non-conventional hedges in an attempt to make money in amarket with little volatility.

One way to remedy the lack of issuance is to utilize thesynthetic market. In a traditional convertible arbitrageposition, the manager is long the bond and short theunderlying equity. In a synthetic play, the arbitrageur will

(continued on page 12)

BRITISH SCHEME TO CONSIDER HEDGE FUNDS The £900 million Durham County Council Pension Fund will consider a foray into hedgefunds next year. “It is an asset class that we have not [previously] looked at,” said Paul Turner,investment officer. In the meantime, the scheme will hire a consultant by the end of nextmonth. The consultant will be involved in helping the pension with the hedge fund allocationas well as with the selection of the managers should the board gives its go-ahead, he said.

The scheme is awaiting the results of an actuarial review due next month. It will thenconduct an internal review to determine whether to conduct an asset-liability study, whichwould, among other things, examine the need for hedge funds. The results of the Myners

(continued on page 12)

ASSET ALLIANCE READIES FUNDS OF FUNDSAsset Alliance, with $4.6 billion, is preparing two new funds of funds for Oct. 1. One ofthese, the Navigator fund of funds, will follow a similar multi-strategy approach to AssetAlliance’s Premier Hedge vehicle, with the main difference being that Navigator will notcontain any of the firm’s affiliates. The second will focus on long/short equity strategies.

Asset Alliance has equity stakes in 14 hedge fund managers. The Premier Hedge fund offunds contains 28 underlying managers, six of which are affiliates.

The inclusion of funds part-owned by Asset Alliance was a turn-off to some potentialinvestors, said Bruce Lipnick, ceo in New York. They were concerned it would not reallocate

(continued on page 12)

FORMER TUDOR EXEC. READIES FUNDDwight Anderson, a commodities manager who left legendary hedge fund firm TudorInvestment Corporation, is readying a second fund at Ospraie Management, where herecently closed a $1 billion fund.

The new fund, called Ospraie Point, will also take long and short positions oncommodities and commodity-related stocks. The major difference will be that new fund willbe more liquid, as it will not invest in the illiquid commodities or small-cap issues.

The fund will have a 2% management fee and a 23% performance fee. It will also have atwo-year rolling lock-up provision. Eric Vincent, general counsel, declined to comment.

—Mark Faro

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Former Omega Honcho Hires Prez Lattanzio Management, a long/short equity firm run by the former head ofequity trading at well-known manager Leon Cooperman’s Omega Advisors, hashired a president and chief operating officer. The New York firm, run by JohnLattanzio, hired Joseph DiMartino, the former president and general partner ofIvory Capital Group, a $1 billion long/short value hedge fund firm based inSanta Monica, Calif. DiMartino said he left Ivory because the firm was acquiredby FrontPoint Partners last year.

Lattanzio Management runs the Lattanzio Equity Parters, a 3(c)(7) hedge fund.The firm is planning to launch 3(c)(1) and offshore versions of its fund by theend of the year, said DiMartino. The idea is to broaden the firm’s investor base, heexplained. Calls to John Lattanzio were referred to DiMartino.

Investment Adviser Group To Back SEC HedgeFund ProposalThe Investment Counsel Association of America plans to back the Securities andExchange Commission’s proposal to require hedge fund investment adviserregistration. Last year the industry group for SEC-registered advisers wrote acomment letter calling for hedge fund manager registration. The powerful industrygroup plans to write another letter along the same lines, said David Tittsworth,executive director. “There is no reason to go back on the original approach to theissue, we just need to figure out which items to address,” he added.

Some of the ICAA’s earlier concerns included how clients would be counted todetermine when registration kicks in and to what degree the SEC should applythe Investment Advisers Act to hedge funds.

Tittsworth disagreed with commissioners Cynthia Glassman and Paul Atkins,who issued a dissent on the proposed rule. “[The dissenters] said SEC staff hadn’tpursued all the options, but the staff did ask a number of important questions inthe release,” he said. These include the question of whether to set a limit toregistration based on assets under management, and what to do with offshoreinvestment advisers, he noted.

CalPERS’ Anson Bullish On LBOs, Venture CapitalMark Anson, cio of the $166 billion California Public Employees RetirementSystem, sees opportunities in leveraged buyout and venture capital funds. Anson,during a conference call in which he commented on the plan’s fiscal year 2004status, said that because many companies have pulled away from leveraged buyoutopportunities in recent years due to the difficult economy, fund officials believe it isan area in which prices are low and therefore, returns could be strong. Additionallyhe said the plan has seen increased deal flow in the private equity secondary market,although he pointed out that the secondary market only comprises between 2-3%of the fund’s $19 billion private equity portfolio. CalPERS alternative investmentmanagement program returned 12.7%, beating its benchmark, the VentureEconomics Young Fund Universe, which returned 9.7%.

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San Francisco Firm Readies FundBelay Capital Management, a San Francisco-based start-up, ispreparing to launch its first fund in October. The long/shortequity fund will be managed by Richard Shepard, who waspreviously a partner and portfolio manager at Weintraub CapitalManagement, according to a Banc of America Securities primebrokerage document obtained by AIN. The fund will invest inindividual equity positions and single sector based exchangetraded funds. It will have a $1 million investment minimum witha 1.5% management fee and a 20% performance fee. Shepardwas traveling and unavailable to comment.

Cadogan Adds Director Of InvestmentsFund of funds firm Cadogan Management has hired PeterHommeyer as director of investments. Hommeyer joined fromBAWAG Bank, an Austrian private bank, where he oversaw a$500 million proprietary fund of funds portfolio out of Vienna.The position was created due to the growth of the firm, whichpassed the $1 billion mark in April, more than doubling its assetsfrom a year ago, said Stuart Leaf, president. Hommeyer willwork with Michael Waldron, director of research, and Paul Isaac,cio, to evaluate and identify potential hedge fund managers.Over time, he will become part of the investment committee,Leaf added. Calls to Hommeyer and Georgia Schütz-Spörl, aBAWAG spokeswoman, were not returned.

CSFB Adds Two Risk ProsCrédit Suisse First Boston’s Hedge Fund Investments (HFI)group, which manages $7.95 billion in fund of funds assets, hasmade two new appointments to its risk management team.Simon Fludgate joined from Citigroup where he was in chargeof operational due diligence, a function he will assume at HFI,said Jim Vos, head of HFI. Paul Fraynt also joined fromGoldman Sachs, and his primary focus will be hedge fundstrategy risk analysis. At Goldman, he monitored risk for thebank’s proprietary hedge fund strategies. Fludgate, Fraynt andShannon Bell, a Citi spokeswoman, did not return calls. AndreaRaphael, a Goldman spokeswoman, declined to comment.

Both positions were newly created in an effort to beef upHFI’s risk management group due to recent growth, said Vos.HFI has increased its assets under management by 47% since thebeginning of the year. HFI has recently been integrated with theAlternative Capital Division, which was created in March. Itcomprises all of CSFB’s alternative investment franchisesincluding private equity, single-manager hedge funds and funds

of funds. It is headed by Bennett Goodman, previously chairmanof CSFB Merchant Banking and Leveraged Finance.

Robeco-Sage Adds AnalystRobeco-Sage Capital Management, a White Plains, N.Y.-basedfund of funds manager, has added a senior-level analyst to itsinvestment team. Michael Murphy was most recently head ofasset management and research at Norfolk Markets, a third-partymarketer, according to the firm’s letter to investors. Robeco-Sagewas founded in 1994 as Sage Capital Management by formerGoldman Sachs partners. It was acquired in July 2002 byRobeco Group. Pam Cantor, director of marketing for RobecoUSA, and Murphy did not return calls.

Dallas Firm Kicks Off PIPEs FundMulti-strategy hedge fund firm Gryphon Partners has launcheda PIPEs fund. The Dallas firm kicked off the Gryphon SpecialSituations Fund last month, said Christine Ashmore, director ofinvestor relations. The firm, which manages $375 million,already had a PIPEs allocation in its multi-strategy fund, sheadded. Gryphon has not yet actively marketed the fund, whichhas $30 million in assets; its investors are mainly existing firmclients. The fund carries a 2% management fee and a 20%performance fee.

San Bernardino Pension Picks AIG, Benchmark PlusThe $4.2 billion San Bernardino County (Calif.) EmployeesRetirement Association has hired AIG Global Investment andBenchmark Plus to each manage $100 million fund of fundsmandates. The pension will invest in the multi-strategy AIGRelative Value Fund and Benchmark Plus’ Institutional Partnersfund, a market-neutral vehicle.

“Benchmark Plus had a successful due diligence,” said DonPierce, investment officer. In addition, the pension wasimpressed by Benchmark Plus’ hedging its market exposurethrough the use of derivatives. For the multi-strategy style, thedecision came down to AIG or Union Bancaire Privée. “AIGhas been running hedge funds for a little longer and they havea larger alignment of interest,” said Pierce. AIG has invested$2 billion in its own fund of funds. The winners were chosenfrom a short list developed last month(iialternatives.com, 7/18).

Michael Dunmire, founder at Tacoma, Wash.-basedBenchmark Plus, Michael Obley, director of marketing at AIG,and Matt Stadtmauer, a marketer at UBP, did not return calls.

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Healthcare Hedge Fund GrowsResearch Team OrbiMed Advisors, a New York-based healthcare hedge fund with$800 million in assets, has beefed up its research team with theaddition of three analysts. Rishi Gupta joined from Yale LawSchool; David Bonita from Columbia University and ChauKhuong from Yale University. All positions are newly createdbecause the firm needs to expand its research coverage as morebiotechnology companies are going public, said Carter Neild,head of marketing. He pointed to the fact that there has been 25IPOs in the biotech sector over the past six to seven months. “Weare trying to cover all 700 public companies worldwide,” he said.The 20-person research team is now fully staffed. Gupta, Bonitaand Khuong, did not return calls.

Fla. Fund Hires Marketing HeadTequesta Capital Advisors, a Palm Beach Garden, Fla.-basedhedge fund manager, has opened its first satellite, in New York,and has hired a former Salomon Brothers official to lead theoffice’s marketing and client services efforts. David Johnson, aformer manager of the New York mortgage-backed securitiessales group at Salomon Brothers where he worked for 10 years,has joined as managing director and a member of Tequesta’sInvestment Committee. Most recently, Johnson invested inprivate equity and co-founded an investment research businessfocused on strategic asset allocation and macroeconomic research.Tequesta currently offers two hedge funds; one focused on fixed-income arbitrage and the other on mortgage-related securities.

Raymond James To Offer Multi-Manager FundRaymond James Alternative Investment Group plans to add aBornhoft Group managed futures multi-manager fund, FrontierFund, to its investment line-up. It will become one of the firstfirms to distribute the fund, said Bryan Meckley, an analyst withinthe Alternative Investment Group. “It is the lowest qualifyingproduct we have” with a minimum investment of $1,000, saidMeckley. The rest of the regional brokerage’s alternative investmentofferings are for qualified high-net-worth investors and have higherminimums. The Bornhoft Group is a Denver-based alternativeinvestment firm with over $600 million in assets.

The Frontier Fund will be rolled out to clients and advisors onSept. 1. It is comprised of eight different commodities tradingadvisors. Interest in managed futures among smaller investors ison the rise, said Meckley. The firm had been exploring this forthe past year and a half and it was a matter of finding the rightoffering, he said. Its two other managed futures offerings require

higher minimums of at least $100,000. The new fund givesclients access to single-managers such as Beach CapitalManagement, Dunn Capital Management, Seaview Capital andGraham Capital Management. It offers daily liquidity, andannual fees depend on the manager, but range between 5.5%-7%. Raymond James Alternative Investment Group currentlyprovides 13 offerings that include funds of funds and single-manager hedge funds.

Ex-NYMEX Prez Weighs Hedge Fund ForayRobert “Bo” Collins, former president of the NYMEX, islooking to set up a fund to trade energy. “I’m thinking of it as amerchant energy company with the capital structure of a hedgefund,” said Collins.

Collins hopes to have specific plans hammered out within thenext month and, if he goes ahead with the venture, expects tobegin trading by the fall. The fund will be run by Collins and acouple of other energy pros at the outset, he said. Additionalhires would be based on the momentum of the fund. Hedeclined comment on the target size of the fund and on whethercapital is already committed to the venture.

Collins denied recent market rumors that he is set to join theenergy trading joint venture being set up by Credit Suisse FirstBoston and Dallas utility TXU. Collins resigned his post at theNYMEX in June after three years. Prior to that he was senior v.p.of natural gas trading at Houston-based El Paso Merchant Energy.

Big Apple Bar Association To SeekImprovements In Hedge Fund RuleThe Association of the Bar of The City of New York will ask theSecurities and Exchange Commission to improve its proposalthat would require the registration of investment advisers tohedge funds. The comment letter “will express ways to improvethe rule…such as in areas where the language needs to betightened,” said Marco Masotti, chair of CityBar’s Committeeon Private Investment Funds.

The committee, which has 37 members, could not reach aconsensus on whether to fully back the proposed rule, but thereare some areas of concern, said Masotti. One is how the SECwould permit an exception for offshore advisers to offshorefunds. Unanswered questions include whether the affectedadvisers would have to comply with SEC rules requiring codes ofethics and chief compliance officers, Masotti said. Another areaof concern lies with the SEC’s definition of private funds andhow private equity and venture capital exceptions might leaveloopholes, he added. Lastly, CityBar is concerned with theproposed rule’s effect on state laws.

AIN.08.16.04 8/12/04 5:15 PM Page 4

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European News

Children’s Fund Taps Cazenove Analyst

Children’s Investment Fund Management,which made a splash last year with anunusual charity-oriented business model,has hired an analyst. The London-basedfirm, run by hedge fund honchosChristopher Hohn and Doug Shaw, tappedStuart Powers, a director at Cazenove FundManagement, where he had worked for

about six years. He ran Spanish and southern European small-cap research for Cazenove. At Children’s, Powers said he willfocus on European mid- and small-caps. Children’s had beenlooking to strengthen its analyst base and Powers’ position isnewly-created, said Hohn. A Cazenove spokeswomanconfirmed Powers’ departure.

Investors Sour On Global Macro, Managed FuturesHedge fund investors are not currently keen to invest inglobal macro discretionary and managed futures funds,according to a recent survey conducted by Geneva-basedhedge fund advisory firm Tara Capital. Instead, many arebullish on emerging markets and equity market-neutral funds.The firm surveyed about 25 large institutions, which betweenthem have $91 billion allocated to hedge funds—more than10% of total hedge fund assets worldwide, said CyrilDelamare, director.

The survey depicts a substantial drop in interest in globalmacro over the past few months; in the previous survey,conducted in the spring, 50% of respondents had planned toincrease their allocations to this area. This figure has nowdropped to 21%, with a further 21% intending to decreasetheir allocations to the strategy. Concerning equity market-neutral, 58% of institutions said they intended to increasetheir allocations to this area. No respondents expressed plansto lower their allocation. The other big winner was emergingmarket long/short, which 48% of investors cited for furtherallocation. The fact that the most popular strategies are at bothends of the risk/return spectrum is somewhat surprising, notedDelamare. “Emerging markets has had a big spike after havinghad no real trend before,” he said. Meanwhile, a current lackof direction in the equity markets is likely to have led toinvestors to allocate to market-neutral strategies.

Unigestion Readies New Fund of FundsSwiss firm Unigestion, which manages around €2.8 billion inhedge fund assets, will launch a new fund at the end ofSeptember that will closely mirror the firm’s longstandingHemisphere Defensive fund of funds. “It will have the samestrategy and process but with different managers,” said AntoinePrudent, v.p. and head of business and product development.

The fund of funds will invest in about 25 underlying managers.Unigestion has been investing in these managers for roughly oneyear as part of a program focusing on start-ups and selected thebest of these for inclusion in the second Hemisphere fund, saidPrudent. The new fund of funds will carry a 1.5% managementfee and a 10% performance fee. The firm intends to launch with$150 million, he said. Unigestion had planned to launch eightsingle-strategy funds of funds at the end of July (iialternatives.com,6/28) but this has been put back to Sept. 7, said Prudent.

Danish Firm Readies Multi-Manager FundDanish firm Copenhagen Fund Management is developing anew currency hedge fund that will invest in several underlyingmanagers using an online software platform. The fund will have atrading account with Currency Management Corporation(CMC), a London-based software company that offers an onlinetrading solution dubbed MarketMaker. Michael Hecht, fundmanager at Copenhagen, will control a master account that willprovide him with a view of the individual sub-accounts andtrading screens operated by the appointed underlying managers.“I have chosen five managers so far that I want to work with andthey have all agreed terms with me,” he said.

Hecht will retain close control and all accounting will becarried out in real-time via the CMC solution. “If I am unhappy[with a manager’s performance] and want to cut them out, I cando it in two seconds,” he explained. Allocations to individualmanagers can be increased with the same promptness. The fundis likely to carry a 2% management fee and 20-25% performancefee, with a €500,000 investment minimum, said Hecht. Thefund will begin trading once an initial target of €10 million hasbeen raised, which is likely to be in the next few months, saidHecht. The majority of investors are expected to be institutionsand family offices; the firm has already had some interest fromseveral small private banks, he added. The fund will replace thefirm’s existing Copenhagen Currency Fund and existing investorsare expected to move their allocations to the new vehicle.

Doug Shaw

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Ex-TFS Head Launches First Freight Hedge FundA group of shipping and freight derivatives professionals, includingthe former head of freight at inter-deal broker TFS in London, aresetting up what is thought to be the first hedge fund to takelong/short positions in tanker forward freight agreements (FFAs).Azimuth Marine Management expects to start trading inSeptember and has a target size of $50 million in funds undermanagement, according to an official familiar with the plans. Callsto the directors of the firm in Luton, James Tweed and DavidWardley, were not returned by press time. Tweed left the topfreight role at TFS at the beginning of the year, the official added.

Gartmore Hires BusinessDevelopment HeadGartmore Investment Management has hired AngusWoolhouse, group marketing and product development directorat INVESCO in London, as head of business development forglobal institutional and alternative investments, a new position.Gartmore redesigned its client service and marketing strategyearlier this month; the institutional sales teams will promoteGartmore’s hedge funds and private equity products as part of themanager’s mainstream institutional offering. Woolhouse reportsto Charles Beazley, global head of institutional & alternativeinvestments. “By bringing together the businesses under oneumbrella and through the hiring of talented professionals likeAngus, we are demonstrating our commitment to meeting thecurrent and future needs of our clients,” said Beazley. Woolhouseand Bob Yerbury, cio at INVESCO in London, did not returncalls by press time.

Funds of Funds Down On Convertible Arbitrage Funds of funds viewed convertible arbitrage as their least favoredstrategy in the second quarter, according to a recent survey byParis-based Seeds Finance. Twenty-five percent of the 44 firmspolled said that convertible arbitrage will also be their leastfavored strategy over the next three months. Separately, 50% ofthe managers have decreased their exposure to convertiblearbitrage strategies over the past three months.

This result contrasts with a former study where convertiblearbitrage was perceived as a good future performer with managersanticipating more volatility going forward (iialternatives.com, 5/14).Volatility levels are now very low, and funds of funds are tired ofwaiting for volatility to increase, explained Vianney Dubois, cfo.With convertible arbitrage, the higher the stock volatility, thegreater the potential is for returns. The second least favored strategywas managed futures (16%), followed by distressed (14%).

Dutch Firm Prepares Offshore FundAster-X Capital Management intends to launch an offshoreversion of its existing long/short European equities hedge fund inthe next few months. The new version will likely be domiciled inthe Cayman Islands and be offered in both euro and U.S. dollarclasses. This move is the result of investor interest, said Jan Stam,founder of the Dutch firm. “Outside investors want a strategythey know well. Also, some of our [existing] clients are funds offunds that want to invest in dollar-[denominated] offshorefunds,” he explained. The firm has a soft commitment from onepotential investor and aims to raise at least $10 million beforelaunching the offshore version.

News From Other PortsAsian Start-Up Preps Japan FundTrident Pacific Capital, a Singapore-based start-up, is preparing tolaunch its Trident Pacific Japan - Absolute Return Fund. The firmplans to launch the long/short Japanese equity fund at the end ofSeptember, said Christoph Schockemoehle, principal. The fund,which has a bottom-up value approach, will have a long bias.

The firm, which has a presence in Tokyo, will seek to tap thebudding German market for capital and is working with itsadministrator and accounting firm to comply with the strictGerman transparency rules for funds, Schockemoehle said. Bothhe and Jens Muenster, cio, are German citizens. Prior to Trident,Schockemoehle was an investment banker at WestLB Panmurein Europe, while Muenster was head of equities at WestLBSecurities Pacific Tokyo.

The fund will carry a 1.5% management fee, a 20%performance fee and a $100,000 minimum.

Korean Manager Plans Fund of FundsDaehan Investment Trust Management will introduce its thirdglobal fund of hedge funds in September. Prudential Plc. isnegotiating an acquisition of Daehan with the South Koreangovernment, but Suk Hee Kwan, Daehan’s general manager forglobal funds, said it is still business as usual at the firm, decliningto comment about potential ownership changes.

The firm has already launched two funds of funds, butboth are closed-end funds that lock in investors’ monies forone and a half years. The firm is establishing this third fundfor new investors, said Suk, adding that investors are keen onabsolute return products because domestic assets aredelivering low returns.

After raising initial capital, the third fund of funds will also bea closed-end fund, to allow it a reasonable time to invest themonies, said Suk. In South Korea, investors are notorious forredeeming their investments after three months.

AIN.08.16.04 8/12/04 5:15 PM Page 7

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

Potential SearchesMandate

Total Fund SizeFund & City Amt (Mlns) Type Assignment (Mlns) Consultant CommentsCalifornia Public Employees Retirement USD162,000 Public D.B. US/ Alternative/ N/A Wilshire Associates, Fund expects to see opportunities in the asset class System (CalPERS), Sacramento, CA Venture Capital Santa Monica, CA going forward. No timeframe for decision.California Public Employees Retirement USD162,000 Public D.B. US/ Alternative/ LBO N/A Wilshire Associates, Santa Fund sees opportunities in asset class over the short System (CalPERS), Sacramento, CA Monica, CA term. No timeframe for decision.Fire and Emergency Services AUD240 Hybrid DB-DC/ Global/ Alternative/ AUD7 Catherine Nance, Fund plans to make a first foray into hedge funds and Superannuation Plan, Perth, Australia Cash Balance Hedge Fund PricewaterhouseCoopers, allocate up to 3% of its assets to global hedge funds.

Perth, Australia No timeframe set for decision to search.Massachussets Pension Reserves USD29,000 Public D.B. US/ Alternative/ USD325 New England Pension Fund will discuss whether to search for another hedge Investment Management Board, Boston, MA Hedge Fund-of-Funds Consultants, Cambridge, MA fund manager at its Oct. 5 board meeting.Northeastern University, Boston, MA USD430 Endowment US/ Alternative USD22 Cambridge Associates, Fund increased its alternative allocation by 5% to 25%

Boston, MA and is seeking managers to handle the increase.Real Estate Institute Superannuation AUD380 Union/Multi- Global/ Alternative/ N/A Brett Elvish, InTech Fiduciaries Fund will examine alternatives such as hedge funds and Fund, Sydney, Australia employer D.C. Hedge Fund Ltd., Sydney, Australia private equity during an asset allocation review in Q4

2004. No further details are available.Real Estate Institute Superannuation AUD380 Union/Multi- Global/ Alternative/ N/A Brett Elvish, InTech Fiduciaries Fund will examine alternatives such as hedge funds and Fund, Sydney, Australia employer D.C. Private Equity Ltd., Sydney, Australia private equity during an asset allocation review in Q4

2004. No further details are available.San Francisco City & County Employees USD11,700 Public D.B. US/ Alternative N/A Angeles Investment Advisors, Fund may consider putting together some type of Retirement System, San Francisco, CA Santa Monica, CA portable alpha strategy but only once it has reviewed its

risk budgeting process, which will take 12 to 18 months.Stanislaus County Employees Retirement USD950 Public D.B. US/ Alternative/ All Types N/A Strategic Investment Solutions, Fund will educate itself on the asset class for Association, Modesto, CA San Francisco, CA diversification. No timeframe for decisions.Statewide Superannuation Trust, AUD950 Corporate D.B. Global/ Alternative N/A David Chessell, Access Fund may increase its exposure to absolute return Adelaide, Australia Economics, Barton, Australia strategies following an asset allocation review. Searches

are possible if the allocation is increased. No timeframe set for decisions.

Verizon Communications Inc., USD72,000 Corporate D.B. US/ Alternative N/A Unknown Fund will reportedly look at portable New York, NY alpha strategies this fall.

New SearchesFire and Emergency Services AUD240 Hybrid DB-DC/ Australia/ Alternative/ N/A Catherine Nance, Fund is searching for a domestic private equity managerSuperannuation Plan, Perth, Australia Cash Balance Private Equity PricewaterhouseCoopers, to replace Foundation Capital (Australia), which is closing

Perth, Australia its fund. Appointment likely by end 2004. It also plans toincrease this portfolio to 3-5% from 2%.

Methuen Contributory Retirement USD60 Public D.B. US/ Alternative/ Private USD3 Kevin Leonard, Segal Advisors, Fund is seeking a private equity fund-of-funds manager. System, Methuen, MA Equity Fund-of-Funds Boston, MA Email (shidalgo@segaladvisors.com) for copy of RFPs.

RFPs due back Sept. 3, 2004.

Updated SearchesArtsenpensioenfondsen, EUR10,200 Hybrid DB-DC/ Global/ Alternative/ EUR500 Unknown Fund plans to study alternative investments in 2005. No Utrecht, Netherlands Cash Balance Hedge Fund further details are available. May invest 2-5% in

hedge funds or funds-of-funds.Artsenpensioenfondsen, EUR10,200 Hybrid DB-DC/ Global/ Alternative/ EUR500 Unknown Fund will examine investing in alternatives in 2005. No Utrecht, Netherlands Cash Balance Private Equity further details are available. May invest

2-5% in private equity.London Borough of Brent GBP345 Public D.B. Global/ Alternative/ GBP17 Mercer Investment Fund has tendered for a GBP17 million hedge fund-of-Superannuation Fund, Middlesex, U.K. Hedge Fund-of-Funds Consulting, London, U.K. funds mandate. Deadline for submission of expressions

of interest is Sept. 29, 2004. Fund hopes to appoint its first hedge fund manager in early 2005.

Military Superannuation and Benefits AUD7,500 Hybrid DB-DC/ Global/ Alternative/ N/A IPAC Asset Management, Fund plans to hire two hedge fund managers Scheme, Canberra, Australia Cash Balance Hedge Fund Sydney, Australia before end of 2004.Military Superannuation and Benefits AUD7,500 Hybrid DB-DC/ Global/ Alternative/ N/A IPAC Asset Management, Fund has decided to allocate 10% of its assets to Scheme, Canberra, Australia Cash Balance Infrastructure Sydney, Australia infrastructure and will hire managers before end of 2004.Norfolk County Council Superannuation GBP1,000 Public D.B. Global/ Alternative/ Private GBP55 Geoff Singleton, Hymans A beauty parade is now on following a tendering process.Fund, Norwich, U.K. Equity Fund-of-Funds Robertson & Co., London, U.K. Fund’s investment committee will select a private equity

fund-of-funds manager when it meets on Sept. 7, 2004.

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; or Paul Quartly at +44 (0) 20 8487 8284.

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August 16, 2004 www.iialternatives.com Alternative Investment News

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B40801

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. For information regarding individual subscription rates,please contact Joe Mattiello at (212) 224-3457.For information regarding group subscription rates and electronic licenses, please contact Dan Lalor at(212) 224-3045.

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

JANUARY 2004VOL. V, NO. 1

Bob Boldt

Clareville Capital’s office is tucked away on the ground floor of abuilding that once housed a clothing store. The firm’s pad at 15

Francis Street, which is ashort walk from VictoriaStation, has been its homesince 2000. Clarevillepreviously inhabited a smalloffice in Fulham, which“looked like a Starbuckswhere a bomb had just goneoff,”explained

Founding Partner David Yarrow. “We wantedsomething light and airy as well as contemporary,and preferably not £75 per square foot as it wouldbe in [popular hedge fund haunt] Berkeley Square.It’s nice to walk out and not bump into anotherhedge fund manager.”

One of the most striking features to greetvisitors is a table football game, as might be foundin any good youth hostel or student bar. “We

don’t play it during the day,” quippedYarrow. The office also acts as thedisplay space for several animalsculptures, including one of a herd ofelephants and another of a wingedhorse—a reference to Clareville’sflagship Pegasus fund. These werecreated by Yarrow’s sculptress mother.“I’ve kept her in gainful employmentfor some time,” he joked.

Clareville is inthe process ofmore thandoubling its floor space to 4,500 square feet,having taken over the lease of the adjacentpremises from a departing furniture company.The extension will provide Clareville withadditional meeting and conference rooms aswell as a new trading space. The latter includesa sports bar, fully equipped with beer and bar

stools, which has already been constructed.

Hedge Fund Habitats features the spaces, from quirky to sublime, where hedge fund managers work. Know any interestingor offbeat hedge fund offices? Contact Managing Editor Mark Faro at (212)-224-3287 or mfaro@iinews.com.

Sports bar on the trading floorPegasus statue

Table football game greeting visitors

Clareville Capital, London

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Alternative Investment News www.iialternatives.com August 16, 2004

Copying prohibited without the permission of the publisher.12

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Quote Of The Week“[It] looked like a Starbucks where a bomb had just gone off.”—David Yarrow, founding partner of Clareville Capital, on his firm’sold office in London’s Fulham neighborhood (see story, page 11).

One Year Ago In Alternative Investment NewsThe $2 billion defined-benefit plan for Siemens was searchingfor its first private equity fund of funds manager as a way tofurther diversify its portfolio and bolster returns. The search wasaimed to be closed by mid-winter. [The pension plan did notmake the allocation and it is unclear whether the project was puton hold or abandoned.]

short a credit default swap to get long exposure to the bond. “Ifyou don’t think the bond will default, you’ll sell protection onthe bond and you’ll pay insurance if it defaults. Meanwhile, youget credit exposure and you receive premium that are theequivalent of your coupon,” said one swap expert.

Another technique is reverse convertible arbitrage, wheremanagers short the bond and take long positions incorresponding common stocks. “Shorting the convertible isdone by sophisticated players and it is a market that isdeveloping,” said Kelley Myers, a London-based convertible

CONVERTIBLE ARBITRAGE(continued from page 1)

away from them during periods of poor performance. Lipnickstressed that the firm has dropped affiliated managers from itsfunds of funds, but acknowledged there was a perception issue.

The 22 non-affiliate managers used by Premier Hedge willbe bolstered by six others to form the new fund of funds. Thenew fund will carry a 1% management fee and a 10%performance fee, with a $250,000 investment minimum. Thefirm expects to start the fund with $25 million, said Lipnick.

The second fund of funds will focus on long/short equitiesand will be a sector-specific variation of the Premier Hedgefund, said Lipnick. Premier Hedge contains eight long/shortmanagers, which will be used by the new fund alongside severalothers. It will contain 12-15 managers at launch and these havealready been selected. This will probably launch with$25 million but the fees and investment minimum have not yetbeen decided, said Lipnick.

Aside from the two new funds of funds, the firm is alsopreparing to launch its first registered CTA index fund forretail investors. This has been in the offing for some time(iialternatives.com, 1/20) and has taken longer than expecteddue to the registration process, which is still ongoing, saidLipnick. The index will be launched by year-end, he added.

—Robert Murray

ASSET ALLIANCE(continued from page 1)

report played a role in enticing the board to consider the hedgefund issue. “Hedge funds are perceived as less safe than normalinvestments, but we realize that it is not necessarily true,” Turnersaid. “The perception of members and trustees need to bechanged. By going through this process, we hope to educatethem and to change their perception.”

Should the board decide to proceed, preference is likely tobe given to funds of funds. “Those are perceived as less riskyand offer greater diversification than single-managers,” Turnersaid. “We would not have the staff in house to manage thehedge funds.” The size of any potential allocation has not beendetermined. The plan allocates approximately 75% to stocks,22% to bonds and 3% to private equity. —E.T.

BRITISH SCHEME(continued from page 1)

bond analyst at Morgan Stanley. This trade is especially profitable when issuers look to

refinance, explained Hart Woodson, a London-based convertiblebond manager with Gabelli Funds, who has been employing thetrade. When issuers announce that they will call their bonds,they offer premiums that cause the bonds to trade uptemporarily, at which time the arb will short, as the price maythereafter trade down relatively quickly allowing managers withshort plays to reap the benefits. —Emma Trincal

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