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

Phillip Goldstein wants the federal ban on hedge fund marketing overturned. regulation policy on what the SEC does. (The agency declines to comment on his activities.) Goldstein argues that it is a First Amendment issue and that investors are grown-ups who don’t need the protec- tion the policy offers. “Let’s say hedge funds could market to the general public but only sell to accredited investors. What’s the harm in that? It’s like saying you can’t go into a Ferrari showroom because you can’t afford the car.” Accredited investors, by deﬁnition, are individuals with a net worth of at least $1 million or $200,000 in income for each of the past two years. The main qualiﬁcation for institutional investors — and so-called superaccredited investors — is having $5 million in assets. Goldstein says he is in negotiations with the SEC and sees an eventual outcome with implications for the entire industry. “I’m not going to tell you the substance of it, but I’m cautiously optimistic.” Plenty of hedge funds operate Web sites, a practice the SEC has thus far ignored, though some hedge funds are secretive black holes that don’t have listed phone numbers and whose managers won’t even talk to the press — ostensibly for fear of breaking the nomarketing rule. “The most conservative lawyers will tell their clients not to take the chance,” Goldstein says, arguing that many hedge fund managers confronted with a citation like the one he got would say, “Yes! Please ﬁ ne us!” for fear of being forced out of business otherwise. The Bulldog site, meantime, has been taken down until things are cleared up. Go to bulldoginvestors. com and all you see is the company logo accompanied by a few lonely words: “Please check back soon.” — Karl Cates CLASS REVIEW Good Hard-Commodity Returns oal prices are reaching new highs, Chinese demand for base metals shows no sign of slowing, and gold remains well above its 1980 peak despite retreating below $1,000 an ounce. No wonder performance has been stellar for hedge funds specializing in hard commodities. In February the Energy/ Basic Materials sector had a 4.45 percent return, compared with 1.94 percent for the HFRI fundweighted composite index and a 3.25 loss in the Standard & Poor’s 500 index. The sector also outperformed the overall hedge fund industry and large-cap stocks for the one- and three-year periods. Returns were 14.79 percent and 15.20 percent, respectively, compared with 7.29 percent and 9.86 percent for the hedge fund industry and –3.60 percent and 5.37 percent for the S&P 500. The top-performing $238 mil- C lion Dynamis Energy Fund led the sector in February with a 12.79 percent return and was up 25.48 percent in the 12 months ended that month. “Relative to the general industry, we run a concentrated portfolio,” says Jack Bocock, general partner at Dynamis Advisors, founded in 1997 in Charlottesville, Virginia. The long-biased fund maintains heavy exposure to energy stocks, holding 40 to 50 at a time and keeping about half its money in its top-ten names. “We think we’re doing good research, concentrating our capital and taking an intermediate- to long-term investment point of view,” Bocock says. “It’s a very healthy sector over the long term.” An entirely different approach has worked wonders for the Wessex Natural Resource Fund, up 11.97 percent in February. A ﬂexible long-short strategy across an array of commodities drove the $334 million fund’s 29.73 percent one-year and 24.43 percent three-year annualized returns. “The key point of the whole sector is Chinese demand,” says Richard Dennis, who joined London-based Wessex Asset Management in May 2004 to launch and manage the fund. It focuses on four areas: gold and precious metals; energy, including coal and ura- nium; soft commodities, like cocoa, sugar, coffee and other agricultural goods; and forest products. “Because we have such a diverse universe, we can skew our portfolio to each area we ﬁnd attractive,” says Dennis. Peter Chesterfield, a former geologist and mining analyst, and Tim Weir, a gold fund veteran, co-founded $588 million-in-assets WAM in December 2000. — F.D. Energy/Basic Materials Return (%) One year Three years through through February February February* Three-year annualized standard deviation Benchmark HFRI energy/basic materials index HFRI fund-weighted composite index Standard & Poor’s 500 index * Annualized. 4.45% 1.94 –3.25 14.79% 7.29 –3.60 15.20% 9.86 5.37 9.83 5.16 8.75 Source: Hedge Fund Research. 16 • INSTITUTIONAL INVESTOR’S ALPHA • APRIL 2008 Photo by John Abbott for Alpha

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

Institutional Investor's Alpha Magazine - April 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Here to Eternity The Good Guys: Voice of Hope Cover Story: The Kings of Cash Where the Money Is Into the Light Interview: Proceeding with Caution Strategies: A Convenient Truth Alpha Bytes: Village Voice Unhedged: Commentary: No Time for Complacency

Institutional Investor's Alpha Magazine - April 2008

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