Former Man executives launch platform for emerging hedge fund managers

A group of former Man Group executives has launched a new hedge fund platform, Revere Capital Advisors, which aims to allow emerging hedge fund managers to focus on their core investment activity at the critical early stage in their development.Revere will adopt a private equity type model, taking strategic equity stakes in partner managers and in return leading the sales, marketing and distribution of their funds. The firm also plans to offer corporate, administrative, compliance and IT services to help funds meet investors' increased demand for solid infrastructure and risk management capabilities.The firm has been founded by Daniel J. Barnett, the former chief financial officer of commodity trading firm E D and F Man and chief executive of Broadmark Asset Management, one of Revere's first two manager partners, as well as other former senior Man Group executives including chief executive and chairman Harvey McGrath, chairman Michael Stone and head of global sugar trading and operations John Kinder.

The article is on :
http://www.hedgeweek.com/articles/detail.jsp?content_id=270829

Hedge Fund Standards: Best Practice

“With influence comes responsibility”, said Paul Marshall, co-founder, Marshall Wace Asset Management, in an article published in The Hedge Fund Journal last year. Marshall and thirteen other well-established managers took this idea and ran with it. They set up the Hedge Fund Working Group (HFWG) under the Chairmanship of Sir Andrew Large. Their remit was to review standards within the hedge fund industry with the aim of creating a benchmark of best practice and of promoting self-regulation: hedge fund managers would be encouraged to ‘comply or explain’. Following a consultation process the HFWG published a report outlining 28 principles-based standards for best practice (‘the Standards’) and in February 2008 the Hedge Fund Standards Board (HFSB) was established as custodian of the Standards. The Standards cover five key areas: disclosure, valuation, risk management, fund governance and shareholder conduct. Now chaired by Antonio Borges, the HFSB is looking to encourage hedge funds to sign up to those Standards.

The article is on :
http://www.thehedgefundjournal.com/research/kpmg-best-practice-survey/index.php

Fund innovation : Emerging managers - healthy returns

Man Investments is a hedge fund group that prides itself on offering investors innovative approaches. Its new Man Vision fund aims to produce an annualised return of 12.5% with annualised volatility of 12.5% by investing in strategies such as Asia and emerging markets, commodities, environmental and energy markets, event-driven and healthcare.As an example of even more way-out strategies, Man Investments head of communications David Gleeson mentioned fine art, movies and freight derivatives as areas that hedge funds are moving into. He added that Man looks to back new managers early: “Hedge funds tend to produce their best returns in the early years and we are keen to get in early with the best and most promising managers.” To this end, it runs a programme called Global Emerging Managers, which will back managers with up to $50m in seed capital.Volatility is another investment opportunity and Crédit Agricole Asset Management co-head of volatility, arbitrage and convertible bonds, Gilbert Keskin, said it is an asset class and an area where skilled managers can produce alpha. “We have two ways to invest in volatility; a directional way or using a long-short approach,” Keskin comments.The directional approach aims to benefit from the tendency of volatility to revert to a mean, while the long-short approach aims to arbitrate volatility discrepancies between different indices or single stocks. In both cases derivatives are used to isolate the volatility element of an option representing an underlying asset.Keskin adds: “Volatility works very well in time of crisis and the alpha generation process is decorrelated from other processes – that is the main reason investors should consider it as an asset class now.”

The article is on :
http://www.funds-europe.com/June-2008/ALPHA-SOURCES-Healthy-Returns.html

Emerging Managers : Playing an important part in today’s troubled markets

It’s an interesting time in the seeding/emerging manager space as the current market environment is making it even more difficult for new funds to get off the ground. Investors are increasingly allocating to ‘safe’ investments, giving capital to larger, more established hedge funds. Yet, a large volume of independent research continues to indicate that early stage/smaller managers will outperform these large, more established funds. So why are investors apparently foregoing the most profitable years of a hedge fund’s life cycle? And where does that leave emerging managers? Whilst it is true that the attrition rate for hedge funds is highest in the first 3 years of their life, the majority of failures are proven to occur at the operational and not the performance level. The determining risk factor has proven to be not the amount of assets under management or performance track record of the fund, but the quality, independence and strength of the operational and control environment. But the days of ‘two-men-and-a-bloomberg’ are long gone. Indeed, recent research conducted by SEI on institutional hedge fund investors concluded that a hedge fund’s infrastructure is even more important that a hedge fund’s performance in the manager selection process1. The majority of emerging managers are adjusting to this demand by partnering with platforms, housing themselves in hedge fund ‘hotels’ or investing heavily in operations to meet the requirements of institutional investors. The perception that start-up hedge funds do not have the necessary infrastructural support to mitigate operational risk is no longer the right one. Having a robust operational infrastructure is now essential for a fund of any size to attract and retain investors. Looking for a safe haven Importantly, operational implosions are not only the preserve of small, early stage funds, as recent events have reminded us. Investing in a big name hedge fund is no longer a guarantee that your money is safe; being a big name or a smaller start-up is not in itself synonymous with success or failure.

By KAREN PAGE, VCM FUND MANAGEMENT LLP

The article is on :
http://www.thehedgefundjournal.com/magazine/200810/commentary/emerging-managers.php

Luxembourg a prime location for Investment Management

End 2007, Luxembourg boasted over EUR 2.1 trillion in net assets in over 10,500 Luxembourg domiciled funds (2,870 legal entities), easily placing Luxembourg as the second largest fund centre outside the United States.
Luxembourg’s position as a key domicile for internationally distributed funds began in 1988 when the UCITS Directive was implemented into local law. Since this date, Luxembourg has enjoyed significant and consistent growth in both assets and fund numbers with a notable surge since the turn of the century reflecting the increasing attractiveness of Luxembourg as a hub for global fund products in both mainstream and alternative asset classes. Historically, Luxembourg’s success has been fuelled by its ability to offer an attractive platform for firstly European and more recently globally distributed retail funds. In addition to the importance of the mainstream, Luxembourg is a major centre for each of the primary alternative asset classes. Its long-standing focus on Hedge funds and fund of Hedge funds products has enjoyed rapid growth in recent years as a result of regulatory and market developments and now comprises a market of over EUR 123 billion in net assets within 902 (sub) funds set up under Luxembourg law. Real Estate funds have been a particular success story with Luxembourg now recognised within this market segment as the leading domicile for structured real estate products targeting international investment and distribution. Private Equity funds are emerging as a 3rd significant alternative asset class with Luxembourg building on its dominance as a location for structuring transactions to become a leading centre for establishing the fund-level vehicles themselves.

The article on the PWC web site :
http://www.pwc.com/lu/eng/about/ind/im_profile/im_prime_location.html

Systematic Approach to Measuring Hedge Funds Implied Credit Risk

Flexibility is the key factor. Investors hire talented portfolio managers with the objective that they deploy their alpha skills. If a manager loses the capacity to adapt his portfolio to difficult markets, he can no longer exercise his skills. In other words, skill alone does not guarantee performance. Success also requires an appropriate balancesheet structure within which a manager can remain flexible and avoid the risk of becoming a toy in the hands of the market, his investors and his prime brokers. Every manager’s motto should be: “Play the game, never become the game”. The systematic approach to balance-sheet structure analysis that we have introduced in this article serves two purposes: first, it makes a contribution to closing the gap with regard to the management of extreme risks; and second, it allows those managing portfolios of hedge funds to assess the risk of a manager losing flexibility and being tossed about at the whim of the market.

By Dr. Nicholas Verwilghen, who is a partner and Head of Quantitative Research and Dr. Didier Michoud, who is Senior Quantitative Analyst of the EIM Group in Nyon :
http://www.eimgroup.com/jahia/webdav/site/eim/users/eimadmin/public/Systematic%20Approach%20to%20Measuring%20Hedge%20Funds%20Implied%20Credit%20Risk.pdf