Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 3)

Letter from the editor Career Builder EDITOR Michael Carroll EDITOR Michael Carroll EXECUTIVE EDITOR Michael Peltz MANAGING EDITOR David Schutt INTERNATIONAL EDITOR Tom Buerkle U.S. EDITOR Jeffrey Kutler EDITOR-AT-LARGE Firth Calhoun ART DIRECTOR Nathan Sinclair ART DIRECTOR Irene Ledwith ASSISTANT MANAGING EDITORS Tom Johnson ASSISTANT MANAGING EDITORS Lewis Knox (Research), William Loob (Editorial Production), Sathya Rajavelu (Director, ResearchTechnologyGroup), (Research), Jeffrey Kutler (Global Operations and Justin Schack (Wall Street, Corporate Finance) Banking), Deborah F. McClellan (Editorial BUREAU CHIEF Kevin Hamlin (Hong Kong) Production), Barbara Rudolph (Money ManageSENIOR EDITORS Loch Adamson (London), ment) Steven Brull (Los Angeles), Jane B. Kenney EUROPEAN Research), Tom Buerkle (London) (Editorial EDITOR Britt Erica Tunick, Jo Wrighton (Paris) BUREAU CHIEF Kevin Hamlin (Hong Kong) SENIOR WRITERS Frances Denmark, Michael Shari SENIOR EDITORS Steven Brull (Los Angeles), STAFF WRITERS Dan Freed, David Lanchner (Paris), Andrew Capon (London), Jane B. Kenney (Editorial Research) SENIOR ASSOCIATE EDITOR Tucker Ewing SENIOR WRITERS Deepak Gopinath, Justin ASSOCIATE EDITORS Sivert Hagen, Schack John Livingstone, WeiQing Lu (Research Specialist), Timothy Roberts (Research Specialist), STAFF WRITERS Rich Blake, David Lanchner (Paris) COPY CHIEF David Wray SENIOR ASSOCIATE EDITOR Tucker Ewing SENIOR CONTRIBUTING EDITORS Fran Hawthorne, ASSOCIATED. Shapiro, Stephen Taub Sivert Harvey EDITORS Emily Fleckner, Imogen Rose-Smith, Julie Segal Carolynn B. Tetro Pam Abramowitz, Danielle Beurteaux, John Aidan Byrne, Wray Phil Davis, Udayan Gupta, Scott Martin, SENIOR CONTRIBUTING EDITORS Fran Hawthorne, Neil O’Hara, Jaye Scholl, Irwin Speizer Hal Lux, Harvey Deputy Copy Charles Smith COPY DEPARTMENT D. Shapiro, Chief: Bill Christophersen; Copy Editors: Ingrid Accardi, (Tokyo), Stephen Taub, Joan Warner Ruth Hamel, Veronica Majerol CONTRIBUTING EDITORS Colin Barraclough, ASSISTANT TO THE EDITOR Elizabeth Simroe Lucy Conger (Mexico City), Jonathan Kandell, ART DEPARTMENT Deputy Art Director: Diana Panﬁl; Lois Madison Reamy, Kazuhiko Shimizu Associate Art Director: Anthony Scerri; (Beijing), Leah Nathans Spiro Senior Designer: Lee H.Wilson; Associate: Sabrina Henley; Photo Editor: Daniella Nilva; COPY DEPARTMENT Deputy Copy Chief: Jeff CranAssociate mer Photo Editor: Alden Gewirtz; Color Imaging Manager: John Miliczenko ASSISTANT TO THE EDITOR Elizabeth Simroe CHAIRMAN & CEO Gary Mueller ART DEPARTMENT Deputy Art Director: Patrizia Bove; GROUP PUBLISHER Christine Cavolina Associate Art Director: Stephanie Lora; Photo Editor: PUBLISHER Joy DeSanto PUBLISHER, INTERNATIONAL Spencer Wicks Anastasia Pleasant; Color Imaging Manager: PUBLISHER, ASIA Wendy Gallagher John Miliczenko ONLINE SALES DIRECTOR Chris DeAngelis COPY CHIEF David EDITOR AND PUBLISHER, SPECIAL PROJECTS PRESIDENT & CEO Christopher R. Brown Ernest McCrary PRODUCTION DIRECTOR Brian Gill PUBLISHER Christine Cavolina DIRECTOR OF FULFILLMENT Robert Tonchuk PUBLISHER, INTERNATIONAL Lisa Traeger CHIEF OPERATING OFFICER David E. Antin PRODUCTION DIRECTOR Alpha,TMGill Institutional Investor’s AlphaTM and Brian 225 Park Avenue South, New York, NY 10003; (212) 224-3300; Fax: (212) 224-3171. MANAGING DIRECTOR OF RESEARCH PRODUCTS © 2007 Institutional Investor, Inc. No statement in this magazine is Denise as a recommendation to buy or sell securities. Neither to be construedMurrell this publication nor any part of it may be reproduced or transmitted DIRECTOR OF FINANCE AND OPERATIONS in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval David E. Antin system, without the prior written permission of Institutional Investor magazine. For Investor’scontact TM and Palmieri (212) 224-3675; Institutional reprints, Alpha Dewey Alpha,TM 225 Park AvFax: (212) 224-3563; e-mail: dpalmieri@iinvestor.com.(212) enue South, New York, NY 10003; (212) 224-3300; Fax: Subscription hotline (800) 437-9997; Overseas (44-20) 7779 8999. 224-3171. Hagen CONTRIBUTING WRITERS SOMEONE SHOULD TELL ALAN GREENSPAN that it’s okay to slow down. In the two years since he left public service, the longtime Federal Reserve Board chairman has started his own advisory company, given numerous speeches (for which he has been paid handsomely), published a 544-page bestselling memoir and signed on as a consultant with two of the world’s biggest ﬁnancial institutions — Newport Beach, California–based Paciﬁc Investment Management Co. and Germany’s Deutsche Bank. It was only a matter of time before the most famous follower of Ayn Rand’s objectivism would join a hedge fund ﬁrm. And what a ﬁrm he chose — Paulson & Co., a New York–based event-driven hedge fund manager that burst into the headlines in 2007 thanks to a hugely successful bet against the subprime mortgage market. The Paulson Credit Opportunities Fund was up 590 percent for the year; a second credit fund, started last January, rose 350 percent. The ﬁrm now manages $28 billion, up from about $7 billion a year ago. John Paulson, its founder and the mastermind of the subprime trade, is several billion dollars richer — enabling him to secure the advisory services of Greenspan, who turns 82 in March and has said he will not work directly with any other fund. There’s no small irony in this pairing. Greenspan, after all, famously said a few years ago that the U.S. housing market was virtually immune to declines, and many pundits blame his low-interest-rate policy earlier this decade for fueling an unsustainable boom. Lately, of course, Greenspan has been saying that the likelihood of a U.S. recession is now greater than 50 percent. That should bring a smile to Paulson, who is betting that the housing problems will spill over into other areas of the economy. Hedge fund managers Louis Hanover and Bruce Richards are also looking to capitalize on the collapse of the subprime market and impending recession. They are the founders of New York–based Marathon Asset Management, a $10.7 billion hedge fund ﬁrm that invests in everything from emerging markets and real estate to global debt and private equity. As Senior Contributing Editor Stephen Taub reports in this issue’s cover story, “Marathon Men” (page 20), Hanover and Richards have established a new hedge fund to buy subprime loans, asset-backed securities and collateralized debt obligations on the cheap. They are also looking to provide ﬁnancing for leveraged buyouts that are having difﬁculty getting funding because of the credit crunch, as well as to snap up troubled companies forced into bankruptcy or needing restructuring. For the founders of Marathon, a slowdown spells opportunity. MICHAEL PELTZ EXECUTIVE EDITOR mpeltz@iimagazine.com DECEMBER 2007/JANUARY 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 3

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - December 2007/January 2008

Institutional Investor's Alpha Magazine - December 2007/January 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Liberal Returns The Good Guy: Inner-city MVP Cover Story: Marathon Men Interview: Rizk Management Profile: Living on Hostile Ground Profile: Buy and Hold In Theory: The Fallacy of Portable Alpha Strategies: Changing Course Alpha Bytes: Behind the Scenes Unhedged: Commentary: An Activist Alternative

Institutional Investor's Alpha Magazine - December 2007/January 2008

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