Institutional Investor's Alpha Magazine - March 2008 - (Page 32) Ivy Asset Management Hachemian, who joined Ivy last May from New York–based alternative-investment firm Celestar Capital Advisors. As part of the restructuring, Simon and Singer transferred oversight of manager research from the CIO to the newly created position of global head of investments. In February 2007 they tapped Peter Noris as CIO and head of a new investment committee. As the former CIO of insurer AX A Equitable, a longtime Ivy client, Noris knew the firm well. They also convinced Stuart Davies, a South African who had been in charge of Ivy’s European and Asian investments, to move from London to New York to become global head of investments. To replace Davies, they persuaded Joseph Burns, one of Geiger’s top lieutenants, to relocate to London. The lack of growth the past couple of years has been frustrating for Simon and Singer, in part because several of Ivy’s smaller, more aggressive funds have performed quite well. The Partners Fund, which has a three-year lockup and invests in just a dozen managers with longer than average investment horizons, has had an average annualized return of 18.2 percent for the past three years. Ivy Global Equity Opportunities Fund, which invests in about 25 global long-short equity managers, was up an annualized 16 percent during that period. Both funds handily outperformed the HFRI fund-of-funds index, which rose 9.3 percent a year. Ivy is looking to re-create some of the magic that made the firm a fund-of-funds pioneer. The elder Simon and Wohl founded Ivy in Garden City, New York, with just $800,000 invested among four managers. The cofounders came up with the idea for the firm after selling their previous company, Wall St. Concepts, which provided recordkeeping for portfolio managers and tracked their performance. Many of Wall St. Concepts’ clients were hedge funds, and investors would call Simon and Wohl to ask for suggestions on good managers. “The manager would get 1 and 20, the investor would get good returns, and at the end of the year, we’d get a bottle of wine,” says Lawrence Simon, referring to the fees that hedge funds charge. Accountants by training, with a focus on process and a reputation for spotting talented managers, Simon and Wohl established Ivy initially to serve high-net-worth investors and small private institutions. Simon, as CEO, managed the business and dealt with clients; Wohl, the CIO, was in charge of investments. Ivy’s co-founders were among the first to see that institutions would come to dominate the hedge fund industry. To capitalize on that trend — and to monetize their business — Simon and Wohl sold Ivy to Bank of New York in October 2000 for an undisclosed amount and signed fiveyear contracts to continue to run the firm as a wholly owned subsidiary of the bank. In January 2005, Bank of New York extended their contracts through 2009. At the same time, the bank announced that the co-founders would no longer be overseeing the day-to-day management of the firm. That would be handled by a new strate- Co-founder Lawrence Simon started Ivy Asset Management with just $800,000 invested among four managers. gardless of Amaranth. “The restructuring wasn’t an idea that came to us as a result of Amaranth, but that was an added impetus to review the investment department at that time,” asserts Simon, 37. He and Singer knew that the changes they were making would eliminate any chance Ivy had to resume asset growth in 2007. “In situations where you have a significant change in people, investors want to sit back and watch to see how things shake out before putting new money with a manager,” explains Kevin Quirk, a founding partner at Casey, Quirk & Associates, a Darien, Connecticut–based consulting firm specializing in investment management. By the end of last year, Ivy’s investment team was back at full strength, with 45 people. The challenge for Simon and Singer now is to demonstrate that the changes Ivy has made to its team — and to the investment process, which included moving the ultimate authority over risk management from the CIO to Singer — will translate into better performance. Doing so, of course, will take time. In addition to its Long Island headquarters, Ivy has offices in London, New York, San Francisco and Tokyo, with a total of 176 employees, and its roughly $15 billion in assets is spread among 70 different funds of funds and customized accounts. “We’re managing funds of hedge funds — these are big tankers, not speedboats,” says managing director Farzine 32 • INSTITUTIONAL INVESTOR’S ALPHA • MARCH 2008
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