Prime brokers : BNP Paribas Securities Services

It has been obvious to hedge fund commentators for a long time now that the industry is changing. It is becoming more institutional, both in the way that hedge fund firms operate and in terms of the sources of the capital they manage. This is having a profound effect on day-to-day business practices and, in turn, is also changing the way hedge funds are serviced.

In the driving seat of this revolution are large, institutional investors, attracted to hedge funds by the prospect of absolute returns and a more active approach to money management. At the same time, they are not prepared to compromise on service standards, and expect fund managers, and their service providers, to deliver the same levels of service and accuracy that they would expect to receive from a large mutual fund structure. This is tough if you are relying on a small, boutique hedge fund administrator to deliver your NAVs. In recent years, we have been witness to a number of landmark deals that have seen major investment banks buying up many of the independent administrators that have been active in the hedge fund space in an effort to tap into the perceived growth in the asset class. The rationale has been to match the scale and infrastructural quality of a major international bank with the specialist knowledge and client base of a boutique administrator. There are, however, other approaches.

One such is represented by BNP Paribas, the major French bank which has been gradually building up its presence in the hedge fund world via a number of avenues, including its Securities Services arm. Other acquisitions for the bank in the alternative investments arena have included fund of hedge funds manager Fauchier Partners, and Bank of America’s prime broking operation. The bank is obviously coming into the hedge fund sector from a variety of different directions, and in all cases, employing its already extensive experience in operations, markets and instruments to give itself an edge.

As a group, BNP Paribas already enjoys considerable scale, with a presence in over 85 countries, 163,000 staff and the additional benefit of an AA+ credit rating. It is hard, in the current climate, to underestimate the value of being the highest rated securities services provider in the world. “We actually had an upgrade during the crisis,” says Maria Cantillon, Global Head of Business Development at BNP Paribas Securities Services (BPSS). “In the hedge fund world, where historically credit rating was not a top priority on a hedge fund manager’s radar, from an investment perspective they now need a credible minimum in their prospectus. Having an AA-rated bank, and a bank that can do prime broking, finance and leverage with that credit rating, brings additional gravitas.”

http://www.thehedgefundjournal.com/profiles/index.php?articleid=85375184

Emerging Managers : ELIZABETH FLISSER, CAPITAL Z ASSET MANAGEMENT

In the hedge fund industry, the so-called emerging manager is both the ‘holy grail’ and the ‘problem child’. Both anecdotally and in research conducted over the years, emerging managers have been shown to offer higher returns than more established funds. They are entrepreneurial and agile, often able to capitalise on market opportunities the bigger players cannot. Yet the risks of investing in early stage hedge funds, from size and liquidity to transparency and headline risk, have largely left institutional investors wondering how – or even if – it is possible to include emerging managers in a fund of funds portfolio. Although the challenges are many, there is no doubt a place for emerging managers in hedge fund of fund portfolios, especially in the current market environment.

What defines an emerging manager? A key consideration for investors is the very definition of an emerging manager. Many define emerging managers simply as having less than a two year track record. Yet the small group of highest profile hedge fund launches – those launching with $500 million or more – quickly attract institutional assets prior to their first anniversary and are hardly regarded as ‘emerging’ by the industry. It is perhaps more useful to consider the emerging manager as one who is both relatively new to the market but has yet to reach critical mass in terms of assets. The best of these managers are experienced portfolio managers, fiercely entrepreneurial and begin building a solid track record right out of the gate. These are the emerging managers that high net worth individuals, family offices and private companies have targeted for several years, while their institutional brethren have remained focused on the larger managers.

The article on : http://www.thehedgefundjournal.com/managerwrites/index.php?articleid=71065389

Caliburn Capital Partners : Thriving at the frontiers of investment

A scaleable research engine - In the start-up phase Caliburn Capital’s partners brought in two PhDs and an aeronautical engineer with a risk management background to build quantitative models. They wanted their quantitative tools to be high-end, and they are: "our quant capabilities are shared only by a couple of the largest funds of funds businesses," asserts Rowlands. They were using statistical tools that were more typical of the proprietary trading desk of an investment bank according to the Caliburn Capital CEO: "these tools were more sophisticated and more relevant to the assets to which we have exposure than others available and more widely used." Continues Rowlands, "the head of quant will tell you that he spends a lot of his time trying to move the quantitative agenda on – twelve months ago they thought they were market-leaders in their use of quantitative tools. We have certainly moved a long way from the souvenirs of the long only industry such as the Sharpe ratio and Sortino ratio. Now people are catching up and we have to continue to work to move the quantitative agenda on. We want to stay at the leading edge of quantitative practice."

The article on : http://www.caliburncapital.com/uploads/THFJCaliburnarticle.pdf

Total-return strategies weather the storm

Investment solutions containing the names “Total return” and “Absolute return” look to use innovative investment techniques to achieve an attractive return above the risk-free interest rate.With the markets in turmoil over the last few months, these techniques have been criticized for failing to deliver the promised returns. Unfortunately, the two strategies are continually being confused with one another, and all too often the impression is conveyed that a positive return will always be achieved. This expectation belongs in the realm of fairytales, making disappointment inevitable.

The article on the "Private" website :
www.private.ag/media/2008/041/de/027_Total_return_strategies.pdf

47 Degrees North New Generation Fund will offer investors access to emerging managers

A new hedge fund run by former RMF-Man Investment analysts is being set up and named after its Swiss latitude, 47 Degrees North Capital Management in Pfaeffikon, Switzerland.

47 Degrees North New Generation Fund will offer investors access to emerging managers with a track record of between a few months and two or three years. This fund will target returns of 12% with 5% to 7% volatility. The 47 Degrees N Seeding Fund will invest in start-up hedge funds, this fund aims for annual returns of 15% over a five-year cycle with volatility of 6% to 8%. The 47 Degrees N Commodity Fund will use the expertise of the team in selecting commodity managers and invest in hedge funds using both directional and non-directional strategies across commodity markets.

Claude F. Porret is the CEO of 47 Degrees North Capital Management. Before founding 47°N in 2006, Claude was the head of RMF Hedge Fund Ventures within RMF Investment Management. She was a member of the management committee and the investment strategy committee. Prior to joining RMF in 2001, Claude spent eight years with Hunter Douglas Management as a director, responsible for treasury management and supervision of the in-house hedge fund portfolio. Prior to this she worked for Salomon Brothers International from 1986, in New York, London, Tokyo and Zurich, initially as a Japanese equity salesperson and subsequently marketing OTC derivatives to institutional clients. Claude started her career in 1981 with Caterpillar Overseas in Geneva, working as a field engineer. Claude received her degree as a Mechanical Engineer from the Ecole d’Ingénieur du Canton de Neuchâtel, Switzerland, and her MBA from INSEAD, France. 47 Degrees North Capital Management is a premier alternative investment firm offering sophisticated institutional investors a unique line-up of specialized fund of hedge funds products. One of its flagship products, the 47 Degrees North New Generation Fund, offers investors access to a diversified portfolio of early stage hedge fund managers.

Newt event with Claude Porret as a speaker in Geneva on 11 - 13 November 2008 :

http://www.icbi-events.com/gaimfof/

Website : http://www.47n.com/

From Diversity to Diversification : The Evolution of the Term “Emerging Manager”

An article from Thurman V. White, Jr. who is President and Chief Executive Officer of Progress Investment Management Company, LLC, a pioneering specialist in developing emerging manager investment portfolios.This article explores current definitions of the term "emerging manager," with an explanation of why emerging managers are becoming more attractive to institutional investors. "Successful Emerging Manager Strategies for the 21st Century," a companion article to be released in the Fall of 2008 on ww.progressinvestment.com, looks at different ways to invest in emerging firms, with discussion of best practices in emerging manager investing.

http://progressinvestment.com/content/files/TheEvolutionoftheTermEmergingManager-Essay5.pdf

PerTrac Research Confirms That Emerging Hedge Fund Managers Outperform Older, Larger Funds

PerTrac Financial Solutions today announced the results of its updated Emerging Manager Study, originally released in March 2007, confirming again the widely held belief that emerging hedge funds perform better than older, larger funds. The company makes the popular PerTrac Analytical Platform, the world’s leading investment analysis and asset allocation software.“Our original study, released early last year, asserted that smaller, younger hedge funds outperform larger, older hedge funds, based on research spanning January 1996 to July 2006,” said Meredith Jones, managing director of PerTrac. “The new study, which includes data through December 2007, confirms the original results.” Data was compiled and analyzed using the PerTrac Analytical Platform software application.Two different analyses were completed: one based on fund asset size, and one based on fund age. In each analysis, funds were re-categorized each month from January 1996 through December 2007 into one of three size groups: up to $100 million; over $100 million and up to $500 million; and over $500 million. They were also categorized into one of three age groups: up to 2 years; 2 to 4 years; and over 4 years. The mean fund return was calculated for each group in each month, creating three size-based monthly indexes and three age-based monthly indexes. Various risk and return statistics were calculated on the returns of each index to evaluate historical performance while Monte Carlo simulations were run on each index to indicate probable ranges of future returns and drawdowns.

http://www.pertrac.com/per0020/web/me.get?web.websections.show&PER0020_1278