Institutional Investor's Alpha Magazine - February 2008 - (Page 14)

“M” Is for More he legend of James Simons grows. In 2007 his ﬂagship Medallion hedge fund returned an almost unheard-of 73 percent, according to sources. And that’s after a fat 5 percent management fee and 44 percent performance fee. The return was more than double the fund’s annualized return of about 36 percent since Simons launched it in 1988 and the second-best year ever, after 2000, when it returned 98 percent. Last year the average hedge fund was up a relatively paltry 10.4 percent, according to Chicago-based Hedge Fund Research. Only insiders, however, beneﬁ ted from Medallion’s success. The fund, T which has $7.5 billion in assets under management, is open only to partners and employees. No one at Renaissance Technologies, the East Setauket, New York, ﬁrm that operates Medallion and two other funds, would conﬁrm the numbers. And it is not known exactly how Medallion made its money, though the fund uses computerized trading to take rapid advantage of price inefﬁciencies. Whatever worked was clearly not applied to Renaissance’s much larger, more conservative and more public fund, the $22 billion Renaissance Institutional Equities Fund, which is still accepting new investors and whose largest class of shares fell by 0.2 percent last year. As of September 30 the Renaissance family of funds — which consists of Medallion, the equities fund and the Renaissance Institutional Futures Fund — had a leveraged stock portfolio with 3,260 issues (including both equities and options) worth $69 billion; at the end of 2006, the three funds reported $47 billion in assets under management. “Remarkable,” says Antoine Bernheim, publisher of Hedgefundnews.com. “Simons deserves the title of best money manager of all time.” — S.T. Aussie Boom H edge fund investment is up Down Under. Invest Australia, a government agency that tracks the industry, says hedge fund assets in Australia totaled A$62 billion ($46 billion) as of June 2006 — a fourfold increase over the total in 2002. According to Daniel Liptak of Sydney-based independent research ﬁrm Hatﬁeld Liptak Advisors, the total grew to about A$87 billion by the close of 2007. Although retail investors accounted for the vast majority of early hedge fund investment in Australia, recent growth has been driven by pension funds, which now account for one third of the funds invested. Reputation, it seems, helps when starting a hedge fund, even if it has been earned in a different domain. That was the case with Hamish Douglass and Christopher Mackay, who in late 2006 left successful careers to establish a Sydney-based hedge fund and general fund management firm called Magellan Financial Group. Douglass, former head of mergers and acquisitions for Deutsche Bank in Australia, and his close friend and onetime rival Mackay, former chairman of UBS Australia, created the group with the support of private backers after taking control of a moribund investment holding company called New Privateer and a hedge fund group called Pengana, which they renamed Magellan Equities. Such was the enthusiasm for the new partnership that the price of shares in Magellan Equities surged nearly threefold, to more than A$2.60, in a matter of months. The increase triggered performance bonuses totaling more than A$20 million for the two managers, an amount Douglass says was simply too much, so the bonus schedule was revised, New Privateer and Magellan Photo by Stephen Baccon/Getty Images for Alpha Magellan Financial Group chairman Hamish Douglass: Proﬁting Down Under. 14 • INSTITUTIONAL INVESTOR’S ALPHA • FEBRUARY 2008 http://Hedgefundnews.com

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - February 2008

Institutional Investor's Alpha Magazine - February 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Alternative Perspective The Good Guys: A Simple Plan Cover Story: Energy and Commodities: Fueling Opportunity Regulation: Energy Trading: The Brawl on the Hill Interview: Master of Values Regulation: Hedge Fund Registration: Way Out West Research Center: Top Hedge Fund Analysts Alpha Bytes: Rocket Man Unhedged: Commentary: Structured for Success

Institutional Investor's Alpha Magazine - February 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.