Institutional Investor's Alpha Magazine - February 2008 - (Page 16)

Equities were merged, and Magellan Financial Group was born. (Douglass says he and Mackay will be out about A$5 million apiece as a result of the change.) “We don’t think we should be paid a large amount of money that is based on a share price based on future expectations,” he says. The two are investing in listed and unlisted funds and providing seed capital for new managers, including some who run hedge funds. They have 27 employees and have launched three long-only, value-focused funds, raising a total of nearly A$400 million. Douglass says new players in the Australian funds management game face a catch-22 in which access is often based on previous performance. That means getting past the advisers who recommend investments to big retail clients, or winning over the consultants who guide the pension funds. “You can’t just hang out a shingle like you can in the U.S.,” Liptak says. “The gatekeepers are strong, and it takes time to build critical mass. That hasn’t encouraged the ﬂy-by-nighters.” Tom Elliott, who started Melbourne-based MM&E Capital hedge fund in 2001 after being executive director of Melbourne-based Flinders Capital, which focuses on M&A, says establishing a track record is tough. “There are many small fund managers that never reach critical mass,” he says. Elliott beneﬁted from the prominence of his partners — the two Ms in the name: John McIntosh, former chairman of Melbourne brokerage ﬁ rm McIntosh Securities, and John Magowan, former head of Merrill Lynch Australasia. Elliott says barriers to entry aren’t all that low, even if hedge funds are popular. MM&E began with A$11 million, much of it from personal contacts, and today the ﬁ rm manages A$160 mil lion in a mix of funds of hedge funds and superannuation funds. — Giles Parkinson CLASS REVIEW Emerging Markets E merging-markets managers ended 2007 at the top of the hedge fund class — a position they have held for four of the past five years. Emerging-market s hedge funds produced an impressive 25.50 percent return for the year, according to Chicago-based Hedge Fund Research. T hat ’s more than double the 10.13 percent return of the broad HFRI composite index and nearly ﬁ ve times the 5.49 percent return of the Standard & Poor’s 500 index (including reinvested dividends). The Top Performers Return (%) Fund* Firm Fund assets ($ millions) December 2007 2006 Three-year annualized standard deviation Monsoon India Inﬂection Fund, LP Magna India Fund – C Shares Karma Fund, LP, Series A Russian Opportunities Fund Ltd. UFG Russia Alternative Fund Ltd. Metage Emerging Market Opportunities Fund Artradis Russian Opportunities Fund Firebird New Russia Fund, Ltd. Pinpoint China Fund East Capital Balkan Fund HFRI emerging-markets index HFRI fund-weighted composite index Standard & Poor’s 500 index Monsoon Capital Charlemagne Capital Karma Capital Mgmt Equinox Finance Mgmt UFG Asset Mgmt Metage Capital Artradis Fund Mgmt Firebird Mgmt Pinpoint Asset Mgmt East Capital Asset Mgmt $494 53 51 165 150 64 63 461 597 1,079 16.08% 102.38% 55.82% 11.68 10.23 9.42 8.44 8.30 7.36 6.55 6.02 5.71 1.97 0.56 –0.69 50.06 86.38 50.94 38.19 36.72 81.45 27.99 25.65 14.56 88.55 17.01 5.03 — 50.68 66.91 — 43.87 64.79 — 18.80 — 47.32 99.94 139.17 41.36 25.50 10.13 5.49 22.00 24.26 12.89 15.78 — 43.18 23.59 10.76 8.61 * Funds with $50 million or more in assets under management that have reported returns to Hedge Fund Research. Source: Hedge Fund Research. And the strong performance of emerging-markets funds in December could foreshadow another good year. India-oriented funds led the way that month, capturing t he top t wo spot s among emerging-markets funds tracked by HF R . Top-ranked Monsoon Capital’s Monsoon India Inflection Fund soared 16.08 percent; Charlemagne Capital’s Magna India Fund gained 11.68 percent. Managers for both funds at tribute their benchmark-thrashing returns to concentrated stock positions in their portfolios. “We have 45 percent of our assets in ﬁ ve holdings,” says Gautam Prakash, founder and managing director of Bethesda, Maryland– based Monsoon Capital. The ﬁrm’s Monsoon India Inﬂection Fund — which invests in Indian midcap companies just as they are hitting their stride — was up 102.38 percent in 2007. Meanwhile, Julian Mayo, who oversees Charlemagne Capital’s Magna India Fund in London, currently focuses on India’s domestic stocks. He says they should continue to beneﬁ t from the rising number of young consumers in the country — a trend that is only expected to gain momentum as India’s economy grows. — F.D. 16 • INSTITUTIONAL INVESTOR’S ALPHA • FEBRUARY 2008

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

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