Institutional Investor's Alpha Magazine - December 2007/January 2008 - (Page 46)

Próxima Alfa from risk management to human resources. Próxima chose Artés, 54, as its CEO because of his capital markets background. He had led BBVA’s global markets team from 1999 to 2001 following ﬁve years at the helm of Santander’s treasury department. Artés, who had also spent seven years in Madrid and London with the global markets group of Bankers Trust Co., was seen as having the right temperament to straddle the hedge fund and banking worlds. The timing of the deal was right for both groups — Vega needed fresh capital, and BBVA was seeking fund-of-hedgefunds opportunities. And with Spain’s securities regulator, the Comisión Nacional del Mercado de Valores (CNMV), about to approve the domestic marketing of hedge funds, BBVA wanted to create the infrastructure to sell them. Próxima dwarfed BBVA’s existing forays into alternative investments, which included a $300 million proprietary hedge fund group called BBVA & Partners and a $200 million fund of hedge funds, Altitude Investments. The new alliance didn’t please everyone. Element Capital Fund, a global macro hedge fund that at the time had about $250 million in assets and had been netting an annualized 19 percent return, withdrew from the platform. “The fund’s managers didn’t believe a Spanish bank could add value to their operation,” Artés says. Próxima hopes to expand its client base through the bank’s massive fund management and pension businesses. BBVA’s global distribution pipeline crisscrosses Western Europe, Latin America, the U.S. Sun Belt and mainland China. In 2006, BBVA had more than 7,500 ofﬁces in 32 countries, with 98,500 employees serving 42 million customers. “Gaining access to the $60 billion in pension funds BBVA manages in Latin America, the $80 billion it manages in its home market and the $140 billion in mutual funds was most interesting from Próxima Alfa’s point of view,” Artés says. ANGLIAN’S BARROWCLIFFE HAS BEEN a trader since his early 20s, when he started buying and selling crude oil in 1985 at London’s Shell International Trading Co. The native of Peterborough, England, moved to New York in 1987, eventually joining Merrill Lynch & Co. as a director and head of energy trading. In 1999, Barrowcliffe moved to Bank of America, where he traded a relative-value portfolio in crude oil and reﬁned products. But when he decided not to return to BofA after taking leave for most of 2003, he knew he was giving up all of the accounting, back-ofﬁce, legal and other infrastructure services that traders like him rely upon. “There’s always the question: Is it the trader or the trading house?” says Barrowcliffe. “When you leave the room, life gets much harder.” In early 2004 a friend introduced Barrowcliffe to Mann, and the pair began working on a business plan for Anglian Commodities. Barrowcliffe says he didn’t even consider other structures, such as going it alone with the help of a third-party marketer. “With that setup, I just felt there would be barely enough time left in the day to trade,” he explains. Since July 2004, Barrowcliffe’s corner of Próxima has grown to include the $100 million Anglian Equity Fund, Photo by Derek Dudek for Alpha “All of our traders looked great on paper when we brought them onboard, but the real test is to see their judgment during a slipup,” says Próxima Alfa Investments U.S. CEO Michael Mann. Mann, a former Russian-German linguist with the U.S. Army, brought plenty of worldly experience to Vega. For the previous ﬁve years, the Lancaster, Pennsylvania, native had been managing director of the international division at Boston-based Massachusetts Financial Services. He had started his banking career at Marine Midland, going on to lead its international businesses in Europe, Africa, the Middle East and the Asia-Paciﬁc region. Mehra pursued a global macro strategy at Vega, trading a variety of ﬁxed-income products, currencies and equities. The ﬁrm’s assets ballooned from about $50 million in 1996 to $1 billion in 2001, according to Mann. (Mehra and other executives at Vega declined to speak for this story.) In September 2004, with $11.1 billion in assets, Vega was tied with London-based GLG Partners as Europe’s biggest hedge fund ﬁrm. But several of Mehra’s contrarian bets backﬁred, triggering massive withdrawals that eventually left just $1 billion directly managed by Vega in late 2006. The trader saw that VegaPlus, the hedge fund incubator created in 2004, might be his most valuable asset. Vega and BBVA announced their joint venture in March 2006, with the Spanish bank’s $1 billion contribution effectively buying out Vega’s monetary stake for 51 percent of the shares in the new venture. Rechristened Próxima Alfa, the platform claimed $3 billion in assets under management, including $1.4 billion from outside investors in VegaPlus and $500 million in unsigned commitments. BBVA pledged to stick with the project for three years, providing everything 46 • INSTITUTIONAL INVESTOR’S ALPHA • DECEMBER 2007/JANUARY 2008

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

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.