Q: I have not heard that argument made, it’s certainly out of the box. Let me bring it back to the hedge fund. Your firm focuses on emerging managers. What would you consider to be an emerging manager? The definition has been fluctuating. As a follow up to that, what makes 2010 the best time to get into emerging managers?
A: The test is always 18-24 months after, when you do the look back and say, “Hey that was a good time.” But look, when I started this business I thought it was a good time, but the look back proves that it wasn’t. We were in a very late-stage market and we were in too much foam and too much froth there was too much leverage in the entire system. In the look back, I was wrong. Sitting here in 2010, markets have delevered, banks are shoring up their balance sheets, real estate is starting to move and starting to transact.
We are in a cyclical economy and we have to accept that. For myself I think we are in a better situation for emerging managers. If 2006 was late stage, 2010 midpoint, we’re sort of early stage and here’s what’s going on:
Prop traders and prop trading groups are being shut down at banks. Large hedge funds have slimmed up their personnel either due to asset position or just trying to create a leaner organization. The result is we have a ton of talent on Wall Street, in commercial banks, investment banks, and other hedge funds, that is now migrating on the street. Many of those people are going to say “If not now, when?” And they’re going to go start their own businesses.
I like to say SkyBridge has a “SkyBridge Inside” product . . . sort of the way Intel branded itself with the saying “Intel is inside.”
We can provide cloud computing, or application service providing, or paychecks, or ADP on payroll and having people off balance sheet their payroll department to one of those firms. SkyBridge can do that for the smaller hedge funds.
http://pragcap.com/an-interview-with-a-hedge-fund-insider
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