Institutional Investor's Alpha Magazine - March 2008 - (Page 34) Ivy Asset Management Ivy’s investment team was slow to act on the analysis, in part because Maounis and his people were saying that Amaranth was working to lower the risk in its portfolio. Following the September collapse of Amaranth, Simon and Singer assembled an internal committee to review its investment in the firm, as well as Ivy’s investment process. Over the course of several weeks that fall, the six-person committee — which included the chief compliance officer, the CFO and the head of client services — met with members of Ivy’s investment team. The problem, the committee determined, had little to do with the fi rm’s manager research or risk analysis. Instead, it found that Ivy’s troubles were largely structural. Both manager research and risk management reported to a single person — CIO Geiger — who also had ultimate responsibility for portfolio management. “The CIO job had become too big for any one individual,” says Simon. The committee recommended several actions, including separating risk management and operational due diligence from manager research and portfolio management. But Simon and Singer decided that more drastic measures were necessary. They parted ways with Geiger, who declined to comment for this story. Two months later they brought in Noris as the new CIO. “My job is more to set investment strategy and oversee the committees,” says Noris, 52, who, like Singer, lives in Manhattan and commutes to Ivy’s Jericho offices. “Stuart [Davies] leads the implementation of our strategies.” Noris is chairman of the newly created investment committee, which includes Burns, Davies, Hachemian, van Inwegen and investment strategies group head Sean Cumiskey. They meet monthly to go over manager approvals and terminations, portfolio allocations and risk profiling (of both managers and portfolios). In addition, Noris is a member of Ivy’s new risk management committee, which also meets monthly. Noris, Davies and the rest of the investment group all report to Simon. The biggest structural change was the separation of risk management. As Ivy and other fund-of-funds firms learned from the Amaranth debacle, identifying risks and acting on them are two very different things. Ivy hopes to empower its risk management and operational due diligence teams, which have full veto power over any investment, by changing the reporting lines. “I used to be part of investments, but now I report to Michael Singer,” says head of operational due diligence Richard Spivey, who joined Ivy in February 2005 after a 20-year career on Wall Street. “It removes any potential conflict of interest.” In his last job Spivey managed Citigroup’s hedge fund credit risk department, approving counterparties, setting credit terms and signing off on trades — useful experience for assessing operational risk during the current credit crisis. Before the restructuring members of Ivy’s investment team would meet internally every fall to go over the firm’s outlook for the upcoming year. Last October, Noris for- CIO Peter Noris (right) and Global Head of Investments Stuart Davies are leading Ivy’s investment charge. founder and CEO of multistrategy firm Glenview Capital. “They’ve taken the time to get to know not only our strategies and approach, but also our people.” In July 2006, Ivy was the initial investor in the Glenview Capital Opportunity Fund, a highly concentrated, unconstrained fund that was up more than 70 percent last year. Ivy made its fi rst investment in Amaranth in 2002, just two years after convertible arbitrageur Nicholas Maounis founded the firm with seed money from hedge fund Paloma Partners Management Co. Amaranth’s lowvolatility strategies appealed to Ivy, which used the fund in market-neutral products like Rosewood and Maplewood and its multistrategy Ivy Defenders Fund. “They seemed very adept at deploying capital,” says Burns, who was a portfolio analyst at Soros Fund Management in New York before joining Ivy’s investment team in 2001. “They were big in converts and then entered long-short equity and commodities.” By the beginning of 2006, Amaranth was one of Ivy’s largest positions. Ivy’s risk management team grew concerned when it determined that more than half of Amaranth’s returns were coming from energy trading and put the multistrategy firm on its watch list that spring. But 34 • INSTITUTIONAL INVESTOR’S ALPHA • MARCH 2008
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