ge eyes asian hedge funds, convertible arb pentium eyes aim listing

At Press TimeHedge Fund Trio Piles Into SPAC 2

U.S. NewsTannenbaum Invests In Blank

Check Co. 4Pirate Increases PW Eagle Stake 6PIMCO Markets Portable Alpha 8

European NewsMitchell Plans Small-Cap Foray 8KGR Avoids Big China Losses 9

Private Equity NewsN.Y. Eyes Infrastructure Partners 10

News From Other PortsVenezuelan Firm Rolls Out CTA Fund 14

Market FocusPrivate Equity, V.C. Returns Up 15

DepartmentsData Zone 16Living On The Hedge

With Logan Short 20

GE EYES ASIAN HEDGE FUNDS, CONVERTIBLE ARBGeneral Electric’s $53 billion pension fund is considering investing in Asian hedge funds andconvertible arbitrage strategies. James Mitchell, managing director, alternative investments atGE Asset Management, which manages the pension’s assets, is discussing a $100 millionallocation to Asian hedge funds, he told delegates at Institutional Investor Conferences’Hedge Fund Business Symposium in New York on Feb. 26.

GE is reviewing several ways to access to Asia. One idea is to select three hedge fundsbased in Asia and another three managers located outside Asia but investing in the region,Mitchell said. Looking at opportunities in Asia is part of GE’s more general search for alpha

(continued on page 20)

PENTIUM EYES AIM LISTINGVicente Zaragoza, founder and ceo of €500 million Swiss firm PentiumFund, hopes to list his firm on the London Stock Exchange’s AlternativeInvestment Market later this year. If the move goes ahead, the firm willbecome one of a small but growing number of publicly-traded hedgefund firms that includes Absolute Capital Management, FortressInvestment Group, Man Group and RAB Capital.

“I wish I could do it yesterday,” said Zaragoza of his plan to list thefirm, though a more realistic estimate is toward the end of this year.


Help Wanted!HOMM TO GO GLOBALFlorian Homm’s publicly traded Absolute Capital Management is hiringan internal sales team to make a first-ever push for assets internationally.The $2.4 billion Palma de Mallorca, Spain-based hedge fund firm has todate relied on word-of-mouth and organic growth, said Sean Ewing, ceo,who co-founded the firm with Homm. “We’ve raised all our money inSwitzerland, London and New York,” he explained. The firm now plansto expand its horizons to take in Asia, the Middle East, Africa, Australia and South America.


What A (Pay) Pal!THIEL TAKES STAKE IN NEW QUANT SHOP

Convexus Advisors, a quantitative hedge fund startup in San Francisco,has sold a minority position to Peter Thiel, co-founder of PayPal and$2 billion hedge fund firm Clarium Capital Management. Convexushas also hired Clarium head trader Matthew Kratter as its cio.

Calls to Thiel were returned by a spokesman, who declined tocomment, citing the personal nature of Thiel’s investment. A Clariumspokesman said Kratter had not yet been replaced but that his duties had


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MARCH 5, 2007VOL. VIII, NO. 9

March Madness Hedge Fund StyleIn celebration of theNCAA basketballtournaments later thismonth, AIN unveils itssecond-ever hedge fundbrackets.See story, page 12-13

Florian Homm

Peter Thiel

Vicente Zaragoza

AIN030507 3/1/07 5:56 PM

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Threadneedle Taps Fidelity Fixed Income Pro

Threadneedle Investments, the London-based assetmanagement firm that manages over $2 billion in hedge funds, has

hired Mark Pearce from Fidelity International as hedge fund investmentspecialist. He is focused on Threadneedle’s fixed-income hedge funds in a roledesigned to bridge the firm’s fund management and sales activities by advising thesales team on the firm’s investment strategies. A Fidelity spokeswoman said Pearcewas fixed-income product manager at the firm, and left the firm’s London officein December. Pearce reports to Stephane Jeannin, investment specialist manager,said Monina Villaroman, spokeswoman at Threadneedle. Pearce was not availableto comment at press time.

Merrill Snags Para Marketer For Cap Intro PostMerrill Lynch’s prime brokerage unit has added to capital introductions roster bysnagging a marketer from Para Advisors. Patrice Gallagher, who was director ofinvestor relations for the multi-strategy hedge fund, has joined the firm to lead apush to extend coverage to pension funds. Her hire follows that of Jennifer Ruskwho was brought on board in January and Tony DiNota, who joined last year.The trio reports to Eamon Heavey, head of Americas Capital Introductions.

Funds Pour Into Healthcare SPACThree hedge funds, including Millennium Management, have invested in anewly formed blank check company focusing on the healthcare space run byprivate equity officials. Geneva Acquisition Company completed its initialpublic offering last month selling 10 million units comprising a common shareand two warrants. Involved in the venture are James McGrath, ceo of FairfaxCapital Partners, and John Rousseau, managing general partner of NewEngland Partners. Also in the mix is Hardwick Simmons, former ceo of theNasdaq Stock Market, and real estate private equity investor Vincent Pica,managing member of Neuwing.

Israel Englander’s shop purchased 651,500 shares, representing 5.2% of thecompany, according to a filing with the Securities and Exchange Commission.Also in the mix was Dorset Management. The hedge fund firm, run by DavidKnott, bought 925,000 shares, representing a 7.4% stake. Fir Tree, which alsorecently invested in an insurance blank check offering (see related story, page 4),purchased a 5.6% stake.

Geneva priced each unit at $6. The warrants are exercisable after one year orwhen a transaction is completed. The strike price is $5.

The company is seeking to acquire a business that manufactures or distributesproducts within the healthcare sector. This potential universe includes medicaldevices, imaging equipment, specialty clinics, rehabilitation centers and privatehospitals. Calls to Geneva and the hedge funds were not returned by press time.

At Press Time

AIN030507 3/1/07 5:56 PM

Project7 1/25/07 11:56 AM Page 1



Fir Tree Buys Into Insurance Blank Check Co.Fir Tree, the New York-based hedge fund firm run by JeffreyTannenbaum, has invested in a newly formed blank checkcompany targeting an insurance acquisition. The firm purchased624,900 shares, or 5%, of Dekania Corp., according to a filingwith the Securities and Exchange Commission. The company isrun by officials from Cohen & Co. and its affiliate, DekaniaCapital Management, which manages collateralized debtobligations comprising trust preferred securities issued byinsurance companies.

Dekania recently completed an initial public offering, raising$99.5 million. It sold units comprising one common share and awarrant to purchase one share at $10. The warrants have a strikeprice of $8 and may be exercised when a transaction is completedor by February 2008.

The company is targeting an insurance company in the U.S.,but may also look to Bermuda or the Cayman Islands. Dekaniawill target life and property & casualty companies, includingspecialty lines. Leading the operation is Thomas Friedberg, amanaging director at Dekania Capital and formerly CEO ofStonington Insurance Company. Stonington, a subsidiary ofRenaissanceRe Holdings, is a specialty line carrier insuringtrucks carrying propane and explosives. Fir Tree declined tocomment. Calls to Dekania were not returned by press time.

Martin Currie Adds U.S. MarketerMartin Currie Investment Management has hired Dan Nilandas v.p., North American client service and sales in New York. Hejoins from Credit Suisse’s asset management division, where hemost recently held a business strategy role, but prior to thatworked in institutional client service and marketing. He

previously spent a decade as a fixed-incomeportfolio manager at Morgan Stanley. AtMartin Currie he will work with foundations,endowments, pension plans and consultants,predominantly in the Southeast and the NewYork area. He joined on Feb. 19 and reportsto Jamie Sandison, director, client servicesand head of the New York office.

Sandison said Niland was brought on board to help him growthe Edinburgh-based manager’s U.S. business. Martin Currie has$25.9 billion under management, 22% of which comes fromU.S. clients. Counting mandates won but not yet funded wouldincrease that sum to 25%. Last year the firm won internationalequity mandates from the Montana Board of Investments, the

New York State Deferred Compensation Plan and ThomsonCorporation, among others. Seven or eight consultants are nowputting Martin Currie forward for international mandates, hesaid. “Martin Currie’s reputation is growing,” Niland said. “Ihave joined them because the firm’s prospects have never beenbetter, and I want to contribute to Martin Currie’s growth.”

Separately, the firm launched its Martin Currie Global EnergyAbsolute Return Fund on March 1, which is managed out ofEdinburgh but available to investors globally. Energy had such abull run last year it would have been difficult to make money onthe short side, Sandison said, but increased volatility this yearshould create opportunities. The long/short strategy has a $200million capacity. Martin Currie hired Jojon Tamir in Octoberfrom hedge fund Strategic Equity Capital to market its hedgefund range in the U.S. The firm is also seeking to hire someoneto sell their hedge funds in the U.K. and mainland Europe(iialternatives.com, 2/16).

Structured Products Firm LaunchesPortable Alpha Strategy Structured Funds Advisors is putting together a cheaperalternative to the typical portable alpha strategy. AlphaSure, astructured note, will be offered in two versions: with beta fromeither the Standard & Poor’s 500 or the Lehman BrothersAggregate Bond Index. Whereas portable alpha usually derives

returns from hedge funds, AlphaSure will useseveral structured notes that provide exposureto non-correlated “exotic betas” such asinfrastructure, inflation and U.S. residentialreal estate. They should deliver 400 basispoints above LIBOR.

Keith Styrcula, managing director ofStructured Funds Advisors, is negotiating

with several investment banks to manage the notes, includingAIG, Goldman Sachs, Merrill Lynch and Macquarie Bank.Ansbacher Investment Management willprovide the equity beta and Styrcula is in talkswith two bond managers.

Ansbacher dynamically sells far out-of-the-money call options. Usually within equityportable alpha strategies, the beta managersimply rolls futures contracts. Ansbacher alsoshorts calls against these futures to add about250 basis points net of fees to the S&P 500,said Jason Ungar, director. Ungar hopes to raise $500 million inthe next 18 months. Ansbacher charges a management fee of 25-

U.S. News

Keith Styrcula

Jamie Sandison

Jason Ungar

AIN030507 3/1/07 5:56 PM

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30 basis points and a 20% performance fee.For the Lehman Aggregate version, which Styrcula intends to

start marketing next month, one of the bond managers isproposing a strategy that should deliver LIBOR plus 500 basispoints by investing in developed macro, emerging market debt,corporate credit and structured credit. Styrcula will tacticallyallocate assets between the bond manager and as many as fivestructured notes. He aims to raise $500 million before year’s end.The management fee will be 50 basis points, plus a 20%performance kicker.

40 Months And Counting!Bear Stearns Structured FundContinues Winning StreakThe $1.5 billion Bear Stearns High-Grade Structured CreditStrategies fund returned 1.6% last month, pushing its streak ofnon-losing months to 40—the fund’s entire lifespan, accordingto a third-party marketing document. Bear Stearns spokespersonsdid not comment by press time.

Ninety percent of the fund’s portfolio consists of structuredfinance securities rated at least AAA and AA-. The remaining10% of the portfolio is currently used to purchase securities thatwill themselves be restructured into investment-grade assets orhave an investment-grade return profile, states the document.The fund’s performance for January was +1.60% and was+10.44% in 2006. A leveraged version of the fund was launchedin August (AIN, 5/1/06).

N.Y. Manager Hires MarketerRAM Capital Resources, a New York-based hedge fund firm, hashired James Boothby as director of client development, a newposition. Boothby, the firm’s ninth employee, joins from SaddleRiver Capital Management, a Ridgewood, N.J., wealthmanagement firm.

He was brought on board to focus on capital-raising for thefirm’s two strategies, a PIPE (private investment in public equity)strategy that has been trading for four years and a secured lendingfund that launched in June, according to Michael Fein, the firm’sfounder and principal.

The newer fund, Shelter Island Opportunity Fund, lends toprivate and public companies and secures the loans through thecompany’s underlying assets or cash flow. The high-yieldconvertible notes and warrants it receives in return provide thefund both current income and capital appreciation, said Fein.The fund has returned 33% since inception.

The PIPE strategy, Truk Opportunity Fund, has returned an

annualized 14.5% since inception. Both funds have 2/20 fees.The investment minimums are $1 million and $500,000 forShelter Island and Truk, respectively.

Pirate Raises PW Eagle Stake AheadOf Acquisition Vote

Pirate Capital, the activist hedge fund firmrun by Tom Hudson, has increased its stakein PW Eagle ahead of an upcoming vote onJ-M Manufacturing Company’s proposedacquisition of the company. Shareholders willvote on the deal April 12, which calls for J-Mto pay $33.50 per share for the Eugene, Ore.-based company that manufactures PVC

pipes. Hudson’s firm now has a 28.5% position followingtransactions in February, according to a filing with the Securitiesand Exchange Commission.

Pirate purchased 133,600 shares from Feb. 5-22 at an averageprice of $33.13. The firm had been steadily increasing itsinvestment including 117,156 shares for an average price of$33.06 in part of January (AIN, 1/22).

PW Eagle was previously a Pirate attack target until the hedgefund successfully landed board seats last summer. Pirateaccumulated its initial 17.9% position, consisting ofapproximately two million shares, from Feb. 28 through March2, 2006. It paid an average of $22.23 per share. PW Eagle wastrading around $33.32 as AIN went to press last week. A Piratespokesman declined to comment.

Caxton Reaches Temporary TruceWith Projector Co.Hedge fund giant Caxton Associates has reached a temporarytruce with InFocusCorporation. BruceKovner’s firm owns 11.2%of the Wilsonville, Ore.-based projector companyand had been pushing for asale (AIN, 1/15). The hedgefund was planning to call aspecial meeting of shareholdersto seek control of the board, but opted against that because thecompany informed it of a possible transaction, according to afiling with the Securities and Exchange Commission.

In exchange for forgoing its right to call a meeting, InFocus

U.S. News (cont’d)

Tom Hudson

AIN030507 3/1/07 5:56 PM

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agreed to put two Caxton designees on its board if a transactionoccurs. If there is no transaction prior to the regularly-scheduledannual meeting, Caxton still may run a slate of directors.

Initially, InFocus approached Caxton about a confidentialityagreement in exchange for details about a possible transaction.That aspect was not incorporated into the agreement, becausethe two sides could not agree on the confidentiality’s duration.Caxton wanted the agreement to be for two weeks, whileInFocus wanted at least 60 days and was only prepared to divulgethe information shortly before it was prepared to execute a deal.

Calls to Caxton and InFocus were not returned by press time.

Minneapolis Firm Rolls Out Small-Cap FundNorthland Directions Equity Group has launched NorthlandDirections Equity Fund, a long/short U.S. equity small-cap fund,according to a Goldman Sachs cap intro document. JonathanHorick, the fund’s portfolio manager, did not return calls bypress time.

Horick joined the firm in November after a five year stint asportfolio manager of a similar strategy at Millennium Partners.He was previously a portfolio manager at Minnesota-basedWhite Pine Capital and prior to that an analyst at DeephavenCapital Management.

PIMCO Doubles Up On Alpha Bill Gross’ PIMCO is marketing a portablealpha strategy with two sources of alpha.Usually portable alpha strategies gain passiveexposure to beta using futures or swaps toreplicate an index, and then add alpha byinvesting in an actively-managed strategy thatshould outperform the cost of financing.Fundamental Index Plus, however, will deliver

extra returns on the beta side as well, by gaining exposure via anindex swap to a proprietary basket of stocks chosen by ResearchAffiliates and designed to outperform the FTSE RAFI US 1000Index. PIMCO can pair this with any of its alpha engines,including fixed income of various durations and absolute returnstrategies. “So you kind of have this alpha squared concept,” saidSabrina Callin, executive v.p. “With this alpha stacking, thatresults in some pretty powerful excess returns.”

Research Affiliates’ enhanced index should outperform cap-weighted indexes by 2-3% per annum and then PIMCO shoulddeliver 2-3% over LIBOR. So the strategy should outperformpassive equity by at least 4%. “The really powerful thing about

this approach,” Callin said, “is that the risk profile isn’t expectedto be materially greater than the equity market,” due to lack ofcorrelation between equity and fixed income.

The strategy selects stocks based on unequal weightings ofbook equity value, cash flow, sales and gross dividends. The firmalso identifies companies in distress and re-weights them to theirlikely future allocation to reduce tracking error to cap-weightedindexes.

European NewsMitchell Eyes Small-Cap StratS. W. Mitchell Capital is planning to launch a small-capEuropean hedge fund toward the end of the year. The $1.5billion London-based firm is run by Stuart Mitchell, a well-known ex-J O Hambro Investment Management partner. Theplanned fund would be managed by Jamie Carter, an analystMitchell hired last year from his former haunt(iialternatives.com, 6/23).

Mitchell is in negotiations with another individual to join theinvestment team. “We know exactly who we want,” he said,declining to name the possible hire until they come onboard.About a year ago, Mitchell told AIN he was considering launchinga fund focused on Eastern Europe (iialternatives.com, 2/10/2006).This is still in the cards, but there are no specific plans. If the firmdecides to go ahead, another investment hire would be made tomanage the fund, he said. S. W. Mitchell manages a $300 millionlong/short European fund, as well as long-only money.

Insight Launches Suite Of Funds Insight Investment has launched seven absolute return funds, sixsingle-strategy UCITS III funds and an umbrella fund availablewith either a U.K.-based NURS or a QIF structure. The funds,which have a target return of cash plus 4%, are modelled on thefirm’s £300 million Cayman Islands-registered Absolute Insightfund of funds range and will replicate the short exposure of theoffshore funds with derivatives, said Paul Dellar, head of productdevelopment in London.

Dellar expects strong demand for the new funds. Manyinstitutional investors in Europe are only just dipping their toesin absolute return strategies and therefore feel more comfortablewith the additional regulatory protection offered by wrapperssuch as QIF, NURS and UCITS III.

The new fund range represents a natural evolution of thefirm’s absolute return strategy and will be run by the sameportfolio managers as the offshore version, Dellar noted. Head ofAlternatives Reza Vishkai will manage the fund of funds while

U.S. News (cont’d)

Bill Gross

AIN030507 3/1/07 5:56 PM

March 5, 2007 www.iialternatives.com Alternative Investment News

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the underlying funds, which are based on bonds, emergingmarket debt, currency, U.K. equity, European equity andinternational equity, each have a team of specialist managers.

A single undisclosed U.K. investor has provided the fund offunds with £240 million seed capital and the manager expects toreceive an additional £300 million from investors in the next 12months, Dellar said.

Langlade Seeks MarketerLondon-based long/short equity firmLanglade Capital Management isseeking a marketer. The six-manfirm runs $150 million in aEuropean long/short strategy,with assets split about 60/40between an offshore fundand a French Aria version.Marketing has thus far beenundertaken by ManagingPartners Francois Langlade-Demoyenand Paul Feldman, but a focused marketerwould free them up to concentrate on trading and managing thefirm, explained Feldman. The firm will hire opportunisticallyand no one has been lined up to fill the spot. The strategy couldhave an approximate capacity of $300-500 million, though thereis no specific timeframe for growing assets.

Long Positions Keep Thames RiverFund In The Black Thames River Capital’s long/short European mid-cap equityfund had a volatile January. The Tybourne Fund was down nearly1.5% at one point but recovered to finish the month up 39 basispoints. An investor letter written by Chris Wright, fundmanager, attributes some of the mid-month dip to severe profittaking in oil- and steel-related stocks. The turnaround wasprimarily achieved thanks to several long positions, the letteradds. Wright could not be reached by press time.

During the month, the fund took a new position in Germanindustrial machinery provider Demag Cranes. Other strongcontributors in January included Swiss specialty chemicalscompany Sika and Danish financial institution Sydbank.Tybourne has held these two stocks almost since it launched lastJuly, and each is up around 50% since then, says the letter. “Eachhas given this performance against a background of no corporateaction and no major change,” it observes. “Each has very strongmomentum in its business and a reasonable rating. These are thekind of stocks that Thomas [Brown, fund manager] and I arecontinually seeking to…create a portfolio with,” Wright’s

commentary adds. Tybourne currently holds €53.8 million and was up 7.44%

last year, from its launch in July. The fund started Februarypositively despite volatile markets, says the letter. Tybourne’sstrategy is a carve-out from the €183.2 million pan-Europeanlong/short Kingsway Fund.

London Firm Preps Media FundLondon-based IBIS Capital will launch a long/short equity fundfocused on the global media industry next quarter. The IBISGlobal Media Fund will be managed by David Forster, co-founder of the firm, and Peter Wilton, who joined last July fromThreadneedle Investments, where he co-managed the CrescendoU.K. Fund. Wilton had no comment by press time.

Forster established IBIS in 2003 with Charles McIntyre.Forster was previously a managing director at Salomon SmithBarney, while McIntyre was managing director at Altium Capital,the spun-off investment banking arm of venture capital firm ApaxPartners.

January Move Pays OffKGR Cuts China Exposure Prior To Correction

Hong Kong- and London-based KGR Capitalmanaged to limit the impact of last week’sChina correction on its Asia-focused funds ofhedge funds by reducing exposure in January,when the firm redeemed from an aggressiveChina long/short manager that accounted forabout 2.5% of its U.K.-listed KGR AbsoluteReturn fund. “I think we were a little bit

prescient about the recent correction,” said Mark White, directorin London. “Our macro view…was that a correction was overduein terms of the Chinese market,” he continued. “I think it’sgenerally been seen more as a healthy correction than the start of abear market.”

“We were clearly exposed to an extent,” he added, referring tothe initial knock-on effect throughout the region and the factthat KGR has maintained its exposure to more conservativeChina-focused funds. “We’ve spoken to our managersand…they’ve given back some of their February returns so far,but the general consensus is that they feel they’ve missed theworst; they’d taken their risk positions down.”

KGR has been increasing its exposure to arbitrage managersacross all three of its funds of funds—the firm had no exposure toarbitrage strategies 12 months ago, but they now account for9.1%-12.4% of the firm’s portfolios. White observed that theuptick in volatility last week should benefit these managers.

Mark White

AIN030507 3/1/07 5:56 PM


© 2007 Knight Capital Group, Inc. All rights reserved.

New York State May SeekInfrastructure Partner The $107 billion New York State Common Fund is consideringseeking infrastructure partnerships in the energy sector for a $75million maiden allocation. Thomas McGrath, senior investmentofficer, said he and his colleagues expect energy to become amainstream investment for public pension funds due toincreasing energy consumption in North America. “We would bethrilled to engage with an operator for energy transmission,” hesaid. “We would prefer energy generally, such as pipelines andnatural storage.” Infrastructure provides a stable source ofincome, he added.

L.A. Firm To Expand In NicheTransportation

Century Park Capital Partners is eyeinginvestments in niche transportationcompanies. After acquiring ROM Corp. lastweek, the Los Angeles-based private equityfirm plans to expand its product line andbegin hunting for companies to fold intoROM, a maker of shutter doors, ramps andother products for trailers in the foodservice,

fire service and building security industries. Chip Roellig, managing partner at Century, said the firm does

not have a set amount of companies it wants to buy. It acquiredROM from Hampshire Equity Partners, a New York shop.Terms were not released, except that Patriot Capital Funding, aWestport, Conn.-based specialty finance company, provided$28.15 million in one-stop financing. Century typically invests$10-$50 million of equity in companies with enterprise valuesbetween $25 million and $150 million.

This is the firm’s second play in the space. In July, it acquiredSpecialty Manufacturing, a maker of safety equipment for schoolbuses and commercial vehicles.

Roellig had been working on the deal since mid-2006, whenJonathan Rosen, a partner at Hampshire and a former co-worker

with Roellig at BP Capital Partners in the 1990s, told himHampshire might be seeking to exit ROM. When Rosen leftHampshire to become a partner with TDR Capital in London,Roellig negotiated the deal with Mike McGovern, partner atHampshire. Calls to McGovern were not returned.

State Pensions Playing Catch-upWith Infrastructure

Some U.S. state pension plans—privateequity’s most reliable investors—are reluctantto jump into new infrastructure funds. Whileit’s not uncommon for non-U.S. institutionsto allocate 5-10% of their assets to the assetclass, U.S. plans have been more conservative,taking their time learning about the asset classwhile enjoying fat domestic equity returns.

“It’s going to take some time to get interest from state pensions,”said Robert Dove, managing director and co-head ofinfrastructure for The Carlyle Group, which is raising a$1 billion fund targeting wastewater treatment plants, airports,seaports and railways in the U.S.

The asset class “seems to be in the discussion phase,”said Steve Cochrane, cio of the North Dakota State InvestmentBoard. “Most of the folks are kind of going through theeducation process, trying to figure out where they would put[infrastructure] into their portfolio.” North Dakota likes thesteady cash potential of toll roads and bridges, but it wasconcerned about risky investments in third-world countries,Cochrane said. Ultimately, JPMorgan alleviated those concerns,and the fund made its first foray into infrastructure in October.It invested $100 million in the JPMorgan InfrastructureInvestments Fund, a global fund still in fundraising.

Clark McKinley, spokesman for the California PublicEmployees Retirement System, which is a Carlyle limitedpartner, wouldn’t say whether it would invest in the Carlyle fund.In November, CalPERS will decide whether to create a new assetallocation program that would include more infrastructureinvestments. “It’s always risky when you get into new ventures,”

Chip Roellig

Steve Cochrane

Private Equity News

AIN030507 3/1/07 5:56 PM

he said, but acknowledged the asset class’ potential. “We expect[infrastructure] to be a burgeoning market here and in Asia andLatin America.”

Sentinel Eyes Prison Co. ExpansionSentinel Capital Partners wants to ride a booming market forU.S. prisons. The New York-based buyout shop is planning anexpansion of recent acquisition Trussbilt, which makes steel

doors and other security productsfor prisons. This is the firm’s firstmove into the space, though it

has experience inmanufacturing.

“We’re in a period whereprojected spending on prisonsand jails in this country isexpected to increase,” saidEric Bommer, partner.

According to a studyreleased by the Pew

Charitable Trust, theU.S. prison population in the next five years is expected toincrease by nearly 200,000, to 1.7 million—a tab that is

expected to cost states $27 billion.This makes Trussbilt poised for success, said Paul Murphy, a

Sentinel partner, because the company’s products can be used innew or refurbished jails and prisons. “We’ll be working with themanagement team to ramp up their production capabilities sothey produce the same quality product at a higher volume,”Murphy said. “There are also acquisition opportunitiesmanagement was unable to pursue, because they didn’t have acapital partner.”

Murphy said the company has specific targets in mind butdeclined to name any. He said the firm does not have a setamount of companies it plans on buying.

JPMorgan To Educate Alaska On InfrastructureStaff of the $38 billion Alaska Permanent Fund Corp. were dueto attend an educational session on infrastructure held byJPMorgan’s Infrastructure Investment Group, as AIN went topress. Alaska CIO Rick Shafer said Mark Weisberg, the cio ofJPMorgan’s infrastructure group, would conduct the sessiontogether with Geoffrey Chatas, a colleague. The board mightdecide to invest in infrastructure, Shafer said.


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AIN030507 3/1/07 5:56 PM



GLG Partners

1

DavidsonKempner Capital

Management

8

SloaneRobinson

4

Vega AssetManagement

5

BrevanHoward AssetManagement

2

Cheyne CapitalManagement

7

LansdownePartners

3

BlueCrestCapital

Management6

D.E. ShawGroup

1

FortressInvestment

Group8

Perry Capital

4

CerberusCapital

Management5

Och-ZiffCapital

Management2

Atticus Capital

7

Moore CapitalManagement

6

CaxtonAssociates

3

BridgewaterAssociates

1

Pequot CapitalManagement

8

Lone PineCapital

4

SAC CapitalAdvisors

5

ESLInvestments

2

StarkInvestments

7

TudorInvestment

Corp3

AQR CapitalManagement

HBKInvestments

6

FarallonCapital

Management1

HighfieldsCapital

Management8

4

RenaissanceTechnologies

5

CitadelInvestment

Group2

Adage CapitalManagement

7

Campbell & Co.

3

Canyon CapitalAdvisors

6

MARCH MADNESS, HEDGE FUND-STYLEWho should win? And why? E-mail Managing Editor Nathaniel Baker at [email protected].

For more, see the gray box on the facing page.

EuroRegion

Conn.Region

NYCRegion

OtherPorts

Region

AIN030507 3/1/07 5:56 PM

To celebrate this month’s NCAA basketball tournament, whichgalvanizes office workers throughout the U.S. and elsewhere,AIN has once again constructed its very own March Madnesstournament bracket for the hedge fund industry. This year’sversion is on the facing page.

Here’s How It Works:As with the real-life version“teams”—in this case hedge fundfirms—have been divided intofour regions: Connecticut,Europe, New York City andOther Ports. Geographicliberties were taken so that thelargest 32 firms—by estimatedassets under management,according to the latest rankings fromAIN sister publication AlphaMagazine—could be represented. Asset sizealso determined the ranking of firms andcorresponding match-ups.

Hedge fund firms will not actually compete against eachother on a basketball court to determine the winners of eachmatch-up. Instead, quantifiable data—performance, asset in-or outflows, favorable or negative press, appearances in theSecurities and Exchange Commission’senforcement log and/or on policeblotters, etc.—will be used whereavailable. This process isunlikely to be purelyobjective and does in noway reflect arecommendation toinvest in or pullmoney from, aparticular firm.Readers areencouraged to voicetheir opinions onpotential winners bycontacting AINeditorial staffNathaniel Baker([email protected];+1 212-224-3648), Mark Faro ([email protected];+1 212-224-3287) or Rob Murray

([email protected]; +44 207-303-1705).First round “winners” will be unveiled next week, with each

subsequent issue detailing the following round. The processwill culminate with the title and third place “games” in the

April 2 issue.

Some Notes On This Year’sBrackets:

Several newcomers and at leasttwo notable absences color thelandscape. Gone are MaverickCapital, Satellite AssetManagement, GartmoreInvestments (last year’s third-place finisher) and AngeloGordon & Co., all of whom

dropped out of Alpha’s top 32.Gone too are Cantillon Capital

Management, which closed one of itsfunds, and Amaranth Advisors, which

closed altogether, even though Alpha’s list—compiled nearlya year ago—included both in the top 32. Goldman Sachs,Barclays Global Advisors, Wellington Management andMan Group also made Alpha’s top 32 but were excludedfrom the brackets because of their involvements in other,non-hedge fund- or alternative investment-relatedbusinesses. (Last year, Wellington and Man slipped through

the cracks and were allowed to participate, but theselection committee has since firmed up its

qualifications for entry). In their place are newcomers Renaissance

Technologies, Pequot CapitalManagement, Adage CapitalManagement, Atticus Capital,Landsdowne Partners, Cheyne Capital

Management, Sloane Robinson and HBKInvestments.

The defending champion is Lone PineCapital.

Back issues covering the road to theFinal Four—as well as the semifinal, finaland third-place face-offs—can be obtained

from Dewey Palmieri at 212-224-3675 [email protected]. For

advertising opportunities contact Jonathan Wrightat 212-224-3566 or [email protected].



2ND ANNUAL MARCH MADNESS HEDGE FUND TOURNAMENT

AIN030507 3/1/07 6:09 PM



Venezuelan FirmLaunches CTA Strat

Caracas-based AV Asset Management,with over $200 million undermanagement, has rolled out a commodityfund based on the CTA strategy of BocaRaton, Fla., firm Haar CapitalManagement. The AV Commodity Fundlaunched Feb. 1 with $5 million, saidRoberto Vainrub, partner.

AV runs several funds replicating the trading strategiesof underlying managers, he explained. Haar Capital’sstrategy holds $20 million and was previously only availablevia managed accounts. Stanley Haar, president, said he waskeen to allow another firm to set up and run a fund basedon his strategy, allowing him to focus on trading. Vainruband other AV partners were already investors via managedaccounts, he added. Haar Capital’s strategy returned27.4% last year.

AV is targeting wealthy individuals but also intends tomarket to institutional investors via prime broker Fimat’scapital introduction services. The fund will charge a 1.5%management fee, with a performance fee of up to 25%; thiswill be reduced to 1/20 for investors that allocate $2 millionor more, said Vainrub. The minimum investment is $50,000.Vainrub said the fund’s assets are likely to grow to $20 millionshortly and no capacity has been set.

Japan FoF Rides Stat Arb, L/SManagers To GainsRogers Investment Advisors’ Wolver Hill Japan Multi-StrategyFund, a fund of Japanese hedge funds, turned in an impressiveJanuary on the strength of its statistical arbitrage managers andlong/short traders. Stat arb allocations returned 43 basis pointsin the U.S. dollar-denominated version of the fund—10bpsmore than in the Yen-denominated version—making the sectorthe best-performing of the five strategy buckets. Equitylong/short traders were close behind, returning 35bps and27bps in their U.S.- and Yen-denominated share classes,respectively. Overall, the two iterations returned 1.21% (USD)and 1.16% (JPY) for the month. Principal Ed Rogers did notcomment by press time.

Stat arb managers “benefited from increasing exchangevolumes and significant peak to trough movements across awide range of stocks,” said the monthly investor letter, which

adds that this same market environment also aided tradingmanagers. The firm makes a distinction between theaforementioned equity long/short trading managers and equitylong/short fundamental managers. The latter had largely flatreturns in January, 6bps and 4bps for the dollar- and Yen-dominated classes, respectively. Overall, management believesthat last month may have marked “the beginning of the roadto recovery” for Japanese long/short managers. “This [January]is the second straight month of positive performance, and wefeel a good indicator of trend in 2007 for this group ofmanagers,” it adds.

Activist managers also turned in a strong month—returning34bps (USD) and 26bps (JPY)—and the firm is equally bullishon the sector. “We think 2007 will see this strategy appliedbroadly and successfully across a wide range of companies inJapan,” the letter states. “Activists will continue to reap thebenefits of positive regulatory changes, and a more acceptingcultural environment.”

Stanley Haar

You read it here first!

DECEMBER 15, 2006

GOLDMAN TEAM READIES

ASIAN L/S STRAT A cadre of officials from Goldman Sachs has formed Citta

Capital Management and is planning to launch a long/short

fund that will invest in Asian equities. Led by Nick Ricciardi,

who managed equity derivatives, structuring and risk arbitrage in

Japan for Goldman, Citta is planning to kick off the fund in

February with around $100 million, said Joe Wat, formerly a

proprietary equity derivatives trader.

As a catalyst for its investments, the Citta Japan Fund will

veer from traditional balance sheet analysis and use companies'

intellectual property, research and development data instead. The

majority of the investments will be in Japan, with some exposure

to Korea and Taiwan, said Wat. Eventually, the fund will expand

its breadth to include China and India, he added. Since R&D

activities typically take time to produce gains, Citta will hold

positions for at least one year, which makes the fund a hybrid

between a typical hedge fund and a private equity investment,

noted Wat. As a result, the fund will have a two-year lockup

FEBRUARY 20, 2007

Hong Kong Firm Joins Japan L/S Bandwagon

HONG KONG: More Hong Kong launch action -coming this time from newly founded shop CittaCapital Management (CCM). The Citta Fund willinvest in Japanese equities and will be managed byCCM founder Nick Ricciardi, who has operated as aprivate investor in Kyoto since 1998. Before thatWe stay ahead of our competition so you can stay ahead of yours.To Subscribe Call 212 224 3570 (USA), + 44 20 7779 8999 (UK),

EMAIL: [email protected]

News From Other Ports

AIN030507 3/1/07 5:56 PM



Cambridge: Private Equity RemainsHot, VC Returns Double U.S. private equity delivered its 14th consecutive positivequarterly return for the three months ending Sept. 30,according to the Cambridge Associates Private Equity Index.Private equity returned 4% for the third quarter and the sameamount during Q2. The asset class gained a robust 23% for theyear ended Sept. 30 and an annualized 26% for three years.“There is a lot of activity in the fund-raising arena,” said RikNuenighoff, director of Cambridge’s non-marketableperformance marketing group. Venture capital, meanwhile,returned 2.2% for the third quarter, more than twice its 1%second quarter performance. Venture capital gained 10% overone year and 10.9% for three years.

Venture investments in communications, health care andsoftware all had positive returns and energy companies did thebest overall, although energy does not make up a significant partof the Cambridge Associates Venture Capital Index. Investments inChina, the U.K., India and the U.S. enjoyed a strong thirdquarter. Funds formed between 1999 and 2001 accounted fornearly 70% of the index’s value. The data was culled from the1,132 venture funds and 617 private equity funds inCambridge’s database.

This year will be a difficult time to make maiden privateequity allocations because a lot of the top managers are closed,said a nonprofit consultant. It is also hard for smallerendowments and foundations to gain exposure because aminimum $50 million investment is often needed to get properdiversification across sectors, vintage years and countries.

Index Arb Holds Interest During Sell-OffCredit traders were focused on index arbitrage last week as theCDX family of indices gave up all of the gains made this yearduring the market-wide selloff Tuesday. The most active flowswere from hedge funds seeking to sell protection on the indexand buy cover on the single-names it references and which hadnot widened so dramatically.

The investment-grade series 7 moved out five basis points,the high-yield moved out nearly 35 bps and the High Vol 11bps, all on Tuesday. Traders reported trading volumes fourtimes usual volumes.

“Some people were just profit-taking here, I don’t thinkanybody really believes this is where the credit cycle turns,” saidone credit trader in the U.S. This view was borne out by thefact pipelines for collateralized debt obligations remain strong

week to week.Victor Consoli, strategist at Bear Stearns, recommended

being a buyer of risk in High Vol 7 at 80 bps or better, andlooking for bargains in autos and BB homebuilders which alsowidened last week. In a research report, the firm’s strategists alsofavored five/seven steepener trades on leveraged buyoutcandidates, particularly those whose stock sold off last week.

Amid the index activity, traders were kept busy with investorslooking to buy protection on Dow Chemical Co. The namewidened over 20 bps last week to 42.5 bps at the start of lastweek. The widening was triggered by a report published in U.K.newspaper The Sunday Express that buyout firms KohlbergKravis Roberts, Blackstone Capital Partners and The CarlyleGroup are putting together a bid for the company in the regionof $54 billion.

China Sell-Off Prompts Yen Option BuyingHedge funds were piling into short-dated options on yen crosseslast week after the global equity market sell-off spread to the yencarry trade. “People were piling into those trades carelessly,” saidone fx options trader, referring to the popular strategy whereinvestors borrow low-yielding yen to invest in higher-yieldingcurrencies. “Now the story is different and everyone is buyingvolatility to protect themselves.”

One-month U.S. dollar/yen implied volatility spiked to a highof 8.8% in New York trading Tuesday from 6.5% the weekbefore, and one-year implied volatility rose to 7.6% Tuesday from6.5% over the same period. On Thursday, one-month impliedvol was at 8% and one-year implied vol was at 7.25%. In thespot market, U.S. dollar/yen plunged to JPY117.95 Tuesday fromJPY121.4 Monday. It was at JPY118.2 Thursday morning.

London traders reported strong demand for downside yencalls and risk reversals with strikes around JPY110. The premi-um for one- to three-month yen calls rose to 1.4 vol pointsThursday from 0.8 vols last week, while the premium for longer-dated calls rose to 1.4 vols from 1.2 vols. “All yen calls are trad-ing at a big premium, but the acceleration is higher on thefront,” said one Citigroup trader. “It’s higher because of themove [in volatility], but people have not made up their mindsyet whether it will be sustained.”

Naomi Fink, fx strategist at BNP Paribas in New York,said last week was likely a “preview of what carry tradeunwinding could look like,” rather than “carry trade unwind-ing in full swing. The stock markets have stabilized, so maybeit’s not the first domino to fall, but it may sensitize marketplayers to the risks taken.”

Market Focus

AIN030507 3/1/07 5:56 PM


PERFORMANCE SNAPSHOT: EVENT-DRIVEN HEDGE FUNDSThe table below displays some of last month’s top performing event-church managers, according to data provided by Eurekahedge.

Jan ‘07 ‘06 YTD 2005 Annualised Sharpe AuMFund Manager Region Return return return Std Deviation Ratio (US$ Mln)

Yaupon Partners Lakeway Capital Partners North America 7.20 27.01 5.32 11.87 1.34 134MMCAP Fund MMCAP Capital North America 5.39 37.73 27.88 10.65 3.39 203Paulson Advantage Plus Paulson & Co North America 5.23 19.27 (1.45) 7.00 0.96 508Bedford Falls Investors Metropolitan Capital Advisors North America 5.10 13.00 10.83 9.00 1.17 110LaGrange Capital Partners LaGrange Capital Partners North America 4.63 13.93 15.07 21.26 0.94 275First Eagle Fund NV Arnhold and S Bleichroeder Advisers North America 4.10 15.82 6.93 16.38 0.75 296Asuka Value Up Fund - Class A JPY Asuka Asset Management Asia 3.45 (8.79) 21.13 12.13 0.29 373Rubicon M&A Fund Rubicon Asset Management Asia 3.04 15.79 11.07 6.36 1.75 81Systeia Event Driven Program Systeia Capital Management Europe 2.53 1.79 3.03 3.46 (0.14) 61Avenue Event Driven Avenue Capital Management Europe 1.95 (0.45) 6.30 7.99 (0.04) 192RAB Special Situations Fund - USD RAB Capital Europe 1.95 43.27 25.11 44.70 1.87 1650Barep Achillea Multi Equity Fund Barep Asset Management Europe 1.89 9.04 1.80 4.28 0.44 147Trafalgar Recovery Fund (EUR) Trafalgar Asset Managers Europe 1.74 8.66 18.37 4.31 2.99 605MM&E Capital Investment Trust No. 1 MM&E Capital Asia 1.49 16.68 7.40 3.93 2.09 50TT Event Driven Fund - Class A EUR TT International Europe 1.40 16.79 22.35 7.60 1.80 354Dexia Long Short Risk Arbitrage Dexia Asset Management Europe 1.27 6.88 9.24 4.46 0.61 758The SFP Value Realization Fund Symphony Financial Partners Asia 1.03 (7.18) 54.57 15.16 1.50 750Coriolis Horizon Fund Coriolis Capital Europe 0.99 12.75 (0.74) 3.29 0.54 112Polo Norte FIM Polo Gestao de Fundos Latin America 0.05 26.70 28.09 4.54 4.76 141

Eurekahedge CommentaryAs new issuance and M&A activity continued on at a fair clip during the first month of 2007, opportunistic managers have managed to post returns averaging nearly 2% for the fourthconsecutive month. The Eurekahedge Event Driven Hedge Fund Index returned 1.9% for January. The month’s returns were driven chiefly by the start of the earnings season mid-month andbrisk M&A and new issuance activity levels. For instance, 36 merger deals closed successfully or were taken off during the month, while 8 new issues came to market in the convertiblesspace in North America alone, raising USD1.8 billion. Consequently, North American managers managed to outperform the composite Event Driven index, returning 2.4% on average. InEurope, profitable opportunities were to be found in the stock-specific volatility surrounding the earnings announcements, and in special situations in M&A (E.ON, Accor), activity turnaround(Siemens, Saint Gobain) and minority buybacks (Allianz, Ciments Francais). This was true of Asian managers as well, given the renewed private equity interest in Japan and emerging Asia.Latin American managers, however, bucked the trend, returning a negative 0.8% on average, as the region’s markets moved further away during the month from a political environmentconducive to free markets.

Data Zone

TALE OF THE TAPEAlternative Investment News’ Weekly Snapshot of Publicly Traded Hedge Fund Firms

Firm Ticker Exchange Closing Price 2/28/07 YTD % ChangeAbsolute Capital Management ACMH.L LSE 445p 45%Charlemagne Capital CCAP.L LSE 68p -18.70%Fortress Investment Group FIG NYSE $30.17 63%Man Group EMG.L LSE 549p 3.30%Partners Group PGHN.SW SWX 132.60 CHF -9.70%RAB Capital RAB.L LSE 94.75p -10.20%

*initial public offering 2/9/07

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AIN030507 3/1/07 5:56 PM



Data Zone (cont’d)

*in USD millionsFor further information, including identities of the institutions and RFP contacts, please visit iisearches.com or contact Keith Arends at 212-224-3533 or [email protected].

MANDATE SCOREBOARDThe table below shows new allocation commitments gained by alternative managers year-to-date through Feb. 28.

2007 Tally Week of Feb. 26 WinsFirms Hired Wins Total* Client Asset Type Amount*

1 Silver Lake Partners 4 4502 Pacific Corporate Group 1 400 California Public Employees Retirement System (CalPERS) Private Equity (Clean Energy) 4003 Coller International Partners 1 3754 New Mountain Capital 2 3005 Grove Street Advisors 1 3006 Hellman & Friedman 4 2357 AQR Capital Management 1 2138 AXA Rosenberg 1 2129 Aquiline Holdings 1 20010 Grosvenor Capital Management 2 190 University of Illinois Foundation Long/Short Hedge Funds 10011 Greenpark Capital 3 17712 Leonard Green & Partners 3 17513 GMO Australia 2 15814 Credit Suisse 2 15015 Abbott Capital Management 1 15016 Enterprise Investors 1 13117 Actera Partners 3 13018 Lexington Partners 1 13019 Morgan Stanley Investment Mgt 3 12820 Carlyle Group 2 12521 Hammond Associates 1 11722 Four Winds Capital Management 1 11523 Benchmark Plus Management 3 10024 Texas Pacific Group 2 10025 Investcorp 1 100

Navis Partners 1 100Satellite Asset Management 1 100 New Jersey Division of Investment Hedge Funds 100

28 Pantheon Ventures 3 9829 Charterhouse Capital Partners 1 9730 Portfolio Advisors 1 95 University of Illinois Foundation Private Equity (U.S.) 9531 Aetos Capital 1 90

K2 Advisors 1 9033 UBS Global Asset Management 2 8734 Sankaty Advisors 3 8035 Attalus Capital 1 8036 The Blackstone Group 3 7537 Intrepid Capital Management 1 75 New Jersey Division of Investment Hedge Funds 75

The Jordan Company 1 7539 Providence Equity Partners 3 7040 Horizon21 1 7041 Henderson Global Investors 1 6942 Ironbridge Capital 1 6343 Lehman Brothers 2 50 Northumberland County Council Private Equity (Global) N/A44 Carval Investments 1 50

Newstone Capital Partners 1 50StarVest Partners 1 50Sterling Stamos 1 50Terra Firma Capital Partners 1 50

49 Northgate Capital 1 4550 Lime Rock Partners 1 4351 Cerberus Institutional Partners 1 40

Pictet & Cie 1 40Thomas H. Lee Partners 1 40

54 KSL Capital Partners 1 3655 Wellington Management 2 3056 Baring Vostock Capital Partners 1 30

Babcock & Brown 1 30 London Borough of Enfield Superannuation Fund Infrastructure 30Davidson Kempner 1 30 New Mexico Public Employees Retirement Association Hedge Funds 30Doughty Hanson & Co 1 30OZ Management 1 30 New Mexico Public Employees Retirement Association Hedge Funds 30Silver Point Capital 1 30

AIN030507 3/1/07 5:56 PM



Calendar Of EventsOrganization/

Event Sponsor Location Date(s) Contact/Web site NotesFirst Annual World Hedge Connecticut Hedge Hyatt Regency, 1800 Putnam Ave, March 5-6 James O’Leary, 203-319-1902, Designed to bring the spirit of Davos to the unofficial Fund Forum Fund Association Old Greenwich, Conn. [email protected], www.cthedge.com capital of the hedge fund world.

Hedge Funds World Terrapinn Madinat Jumeirah, Dubai March 5-8 www.terrapinn.com/2007/hfwme/ How to tap into this market and create a portfolio of Middle East 2007 investments for big Arab investors now and in

the future.

Hedge Funds World Awards Terrapinn/Man Investments The Jumeirah Beach Hotel, Dubai March 6 www.terrapinn.com/2007/awardsme/ Man Investments is proud to support the Hedge Middle East 2007 Funds World Middle East Awards.

Inside Views From the Art World 100 Women in Hedge Funds 30 Gresham Street, London March 6 www.100womeninhedgefunds.org The emergence of art as an alternative asset class.

Hedge Fund Incubation and Financial Research Associates The Savoy, London March 7-8 919-325-0313. www.frallc.com Hear from RMF Investment Management, Investcorp, Seeding Conference M.D. Sass, others.

6th Annual Public Pension Fund AIN sister publication Money Hyatt Las Vegas March 11 www.iievents.com Honor the people and organizations that have made Awards For Excellence Management Letter and significant strides in the public pension investment

Information Management community during the previous year. Network

1st Annual Alternative Investing Alternative Asset Wynn Las Vegas Resort March 11-14 +1-212-832-7600, This conference is designed to re-focus on the Summit: Absolute Return Investment Management [email protected] important elements: Capital raising and having fun.

Managed Accounts USA Hedge Funds World The Embassy Suites Hotel, March 13-15 www.hedgefundsworld.com/2007/mausa/ Believed to be the first conference dedicated to the New York subject of managed accounts.

Options Market Conference Securities Industry and Sidley Austin offices, March 14 Tom Price at 212-618-0560 or Half day event addressing emerging issues in the Financial Markets Association One South Dearborn, Chicago email [email protected] options markets.

Foreign Exchange and Opal Financial Group Ritz Carlton, Chicago March 19-21 www.opalgroup.net Aims to create a direct yet intimate roundtable Commodity Summit environment. Each panel will have time allotted for

delegate question and answer.

GAIM Asia 2007 The International Centre for JW Marriot, Hong Kong March 26-28 www.icbi-uk.com/gaimasia/ Investor/investment opportunities in the Business Information (ICBI) Asia-Pacific region.

Hedge Funds World Espana Hedge Funds World The Westin Palace, Madrid March 27-29 www.hedgefundsworld.com/2007/esp/ The creation of a specific status for hedge funds in Spain is providing unprecedented opportunities…

Profit & Loss Forex Network London Grange City Hotel March 29 www.profit-loss.com The future of the algorithm, the realities of the new FX market and the search party: Where are the opportunities in FX?

Tech Trends: M&A & Buyouts— Strategic Research Institute Marriot Fisherman’s Wharf, March 29-30 www.srinstitute.com/techtrendsM&A, Featuring Martin Wolf, David Blumberg, others.The Barbarians Return to the Net? San Francisco +1-212-967-0095

Global Macro Hedge Calyon Financial, in The Reuters Three Times Square April 12, 2pm www.edunar.com Keynote speeches, research presentations and ‘A Funds Edunar Association with the Chicago Conference Center, New York Great Debate’, followed by a cocktail reception

Board of Trade. where the afternoons’ views can be discussed.

13th Annual Institutional MARHedge (Euromoney/II) Ritz Carlton, San Francisco April 15-17 www.marhedge.com Accessing New Talent and New Opportunities.Investor Investment Conference

Alternative Investment Opal Financial Group Landsdowne Resort, April 15-17 www.opalgroup.net Allocation strategies and a golf tournament, Summit East Lansdowne, Va. among others.

The Wall Street Green Global Change Associates Reuters Building, 3 Times Square, April 16-17 [email protected], Carbon trading, CDM project finance, solar energy Trading Summit & Hedge Connection New York +1-212-537-6152. credit generation, where green hedge funds and VC

are looking next.

3rd Annual Hedge Fund Institutional Investor Events Union League Club, New York April 17 www.iievents.com Emerging developments in quantitative modeling, Performance and Risk qualitative nethods and analytical tools.Measurement Forum

Algo Trading West World Research Group Le Meridien Hotel, San Francisco April 17-18 www.worldrg.com Buy side faculty discuss how they are integrating algorithmic and electronic trading.

EuroHedge Summit 2007 Hedge Fund Intelligence Palais de la Bourse, Paris April 18-19 www.hedgefundintelligence.com The leading lights of the hedge fund world will gather again in Paris…

China Hedge Funds 2007 JetFin Events Hotel Mandarin Oriental du April 24 www.jetfin.com Matching investors with managers.Rhone Geneva

Alpha Max 2007; Maximizing Opal Financial Group Four Seasons Hotel, May 2-4 www.opalgroup.net Features dialogue-driven panel discussions led by Alpha in Institutional Portfolios Lisbon, Portugal institutional investors and consultants. Power Point

presentations are prohibited.

Structured Products World London Terrapinn Royal Garden Hotel, London May 2-4 www.terrapinn.com/2007/sp/ What structures, underlyings and capital protection will be of interest in the near future?

AIN030507 3/1/07 5:56 PM


He said he would like to raise €500 million, thereby doublingassets under management, but added that it is too early to sayhow much equity he would offer to the market: “I wouldneed investment banking advice before I know that,” he said,noting that the firm has not begun to interview possibleunderwriters yet.

Among its strategies, Pentium manages several funds offunds, and Zaragoza said that any money raised by going publicwould be invested in its offerings. “It would give us equity to

PENTIUM EYES(continued from page 1)

“We’ve got no sales people, so now is the time to grow thatinternally,” Ewing said.

The firm will make six-to-ten sales hires within the next year,said Ewing. These will be spread globally, with two-to-three ineach of the U.S. and Europe, and the others on the ground inthe new regions. The firm is interviewing but has not hired yet.Ewing declined to specify a goal for asset growth; he said the firmhas “very demanding, aggressive targets internally.” He declinedto provide a figure. —R.M.

HOMM TO(continued from page 1)

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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


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.


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,


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.

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

JANUARY 2004VOL. V, NO. 1

Bob Boldt

been temporarily assumed by COO Michael Harte. “We don’tanticipate any impact on the strategy,” the spokesman noted.“We’re big a fund and we have a deep trading bench.” Kratterdeparted at the beginning of January, since which time there hadnot been any noticeable changes, he added. The fund returned1.8% in January, according to data culled by Swiss private bankSyz & Co.

Convexus was suposed to launch its Master Fund, with onshoreand offshore feeders, last month, but is now expected to do soApril 1 instead. CEO Richard Griffin is the main architect of thefirm’s trading models, which are “based on proprietary research inthe fields of behavioral and computer sciences,” according to oneof the firm’s marketing presentations. Griffin declined tocomment. For the time being, the funds trade U.S. equitiesexclusively, though the firm may expand its models at a later date.

Griffin was previously at Babcock & Brown, where he co-founded the derivatives structuring group. Prior to that, he had

THIEL TAKES(continued from page 1)

fund new strategies and invest in new managers,” he said,explaining that the move would provide an alternative toactively marketing the firm’s funds. —Robert Murray

AIN030507 3/1/07 5:56 PM

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Talk about bad timing. Short-biased hedge fundKeel Capital shut down Monday night due to

“lack of attractive short-selling opportunities.” Thiswould have been Monday, Feb. 26, hours before a 9% crash on theShanghai stock exchange ushered in bloodletting in worldwide equitymarkets...The sell-off presents an opportunity for hedge funds todemonstrate just how “uncorrelated” their strategies really are. Wereinvestors truly protected from the vicious downside that comes with acorrection of this magnitude?...I’m sure we’ll see several managers,who were smart enough or nimble enough to either short U.S. equitiesor pile into Treasurys on Tuesday morning, claiming uncorrelated-ness.Or you’ll have guys like Roy Niederhoffer, whose NegativeCorrelation Fund cleaned up, posting an 8.6% return on Tuesdayalone—its best one-day return in three plus years of trading. But aperfectly inverse relationship still qualifies as correlation in my book.Show me somebody who was flat Tuesday and we’ll talk aboutuncorrelated returns. As far as I can tell, the only way to have pulledthat off was by hiding cash in a mattress, though I haven’t encounteredanybody charging 2/20 for that (yet).

Living On The Hedge…An occasional column by Logan Short,an astute industry observer. He can bereached at [email protected].

One Year Ago In Alternative Investment NewsSAC Capital Advisors, the mammoth firm run by StevenCohen, quietly revamped itself. Two subsidiaries, CR IntrinsicInvestors and Sigma Capital Management, moved to theforefront of the firm’s growth plans. [SAC had a banner year in2006, and was nominated by AIN for Launch of the Year, forthe rollout of its multi-strategy fund. This was its first entréefor institutional investors and it came at a steep price: 3/35 feeswith three-year lock up provisions. It was launched withroughly $2.5 billion.]

Five Years AgoRecord inflows from pensions and other institutions werecausing many established players to close their funds to newinvestments. Hungry for alpha at the height of a vicious bearmarket, institutions were forced to seek out new or emergingmanagers for the first time. Predictions called for the then-$500billion industry to double in three-to-five years. [The $1 trillionthreshold was crossed in November 2004, according to mostestimates (iialternatives.com, 11/3/04), sooner than expected.Assessments of “too much money chasing too few opportunities”continue unabated. Yet a recent study by Citigroup suggeststhese capacity concerns are overblown (AIN, 2/27).]

Quote Of The Week“Our macro view…was that a correction was overdue in terms ofthe Chinese market.”—KGR Capital Director Mark White, onwhat prompted his firm to reduce exposure to Chinese managers inJanuary, which permitted KGR to limit the impact of last week’s correction(see story, page 9).

20 ©Institutional Investor News 2007. Reproduction requires publisher’s prior permission.


around the world, said Chris Linehan, spokesman. There is notimeframe for a decision. Through Linehan, Mitchell declined toexplain why he is mulling convertible arbitrage.

GE’s pension plan invests $3 billion in hedge funds. Of this,15-20% is devoted to “enhanced alpha managers,” which havehigher volatility but higher returns. Another 15-20% is with“diversification managers” that deliver steady returns, such asfunds of funds, fixed income arbitrage, distressed debt, multi-strategy. The remaining 60-70% is in long/short. The fundavoids global macro and CTAs. Over the long-term, GE’s hedgefund portfolio should return 300-400 basis points over theStandard & Poor’s 500 Index. Mitchell said GE concentrates onrisk management.

While GE Asset Management takes money from third-partyinstitutional investors for its equity and bond strategies, itmanages hedge funds exclusively for GE’s pension plan.

—Emma Blackwell & N.B.

GE EYES(continued from page 1)

trading stints at Salomon Smith Barney and Merrill Lynch.Jonathan Ross, who co-founded the derivatives group atBabcock & Brown, is the new firm’s chief operating officer. Itshead of quantitative research is Romanian-born Radu Mihaescu,a decorated mathematician who is currently finishing his Ph.Dat Cal-Berkeley.

The fund has a $1 million investment minimum. Fees are2/20 with a high-water mark. The prime broker is MorganStanley. —Nathaniel Baker

AIN030507 3/1/07 5:56 PM

ge eyes asian hedge funds, convertible arb pentium eyes aim listing

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