Institutional Investor's Alpha Magazine - April 2008 - (Page 82)

“We have institutional clients who choose to follow our portfolio construction advice exactly,” says Albourne co-founder Simon Ruddick. who have allocated roughly $200 billion to hedge funds, including Hermes Investment Management in the U.K., Japan’s Mitsubishi Corp. Pension Fund and the University of Texas Investment Management Co. With that kind of capital in tow, Albourne has leverage that hedge funds understand. By cooperating with a consultant like Albourne, hedge funds ﬁgure they have a better chance of attracting institutions. Albourne, in turn, gets the information it needs to do analysis and make recommendations. “More hedge funds want money from institutions, and more institutions want to give money to hedge funds,” says David Harmston, head of the U.S. client group at Albourne Partners, based in Rowayton, Connecticut. “It is moving everything to the kind of transparency you get in the longonly market, although it is certainly not there yet.” Harmston, a 36-year-old Brit, likes to approach the serious task of evaluating hedge funds with a sense of humor. He arrived at U.K.-based Albourne in 2000 after a stint at JPMorgan Investment Management in London, where he worked in equity and derivatives management. His ﬁrst project at Albourne was to create an online presence that would set the company apart in the staid world of ﬁnancial consulting. What you see when you call up Albourne Village’s Web site is a view of a quaint English hamlet. Users can click on its buildings to get content. The village now boasts 55,000 residents, who check in for daily news briefings (including stories posted by members), chat with other residents in the “pub” or visit any of the other public “buildings.” Paying customers of Albourne get to enter the castle on the hill, where they can access data and analyst reports on individual hedge funds and managers. “It is a bit tongue in cheek, with a little bit of English humor around it,” Harmston says of the village. “That, combined with the fact that it is free, has helped. But it has amazing vitality around it. People post information, add ideas. It is a portal on the hedge fund industry.” It is also a low-level data collection point for Albourne, which has a sort of trapdoor built into the public site that its research team can use to capture information and opinions that ﬂow through the message boards and news postings. The data may ultimately help Albourne analysts track and report on individual hedge funds and managers. Albourne Partners clients pay ﬂat fees of either $240,000 or $400,000, depending on the level of service and the number of funds covered. A number of other advisers are vying with Albourne for foundation and pension money. One of the largest is Cambridge Associates, a Boston-based general consulting ﬁrm. Cambridge maintains 11 researchers who evaluate hedge fund managers and 28 hedge fund consultants who help manage portfolios. In some cases, clients will double up, for example, using Cambridge for overall portfolio construction and Albourne for hedge funds. Technology plays a key role for institutional investors wanting to track, review, monitor and compare hedge funds. Investment and client management software, long used by funds of funds to help manage their operations, can also be a powerful tool for managing hedge fund portfolios. “If you are looking at 7,000 funds, say, you need to have an efﬁcient way of doing that,” said Meredith Jones, head of global marketing at New York–based PerTrac Financial Solutions, an investment management software provider. “You have to have a software tool that can actually make sense out of the chaos.” Founded in 1994, Albourne has a workforce of 140 that tracks about 1,500 hedge funds and produces regular reports on risk, strategy, management, performance and other topics. Albourne also rates hedge funds, giving investors a score sheet to help them pick. Harmston has been the firm’s U.S. face since 2001, when he moved from London to open an ofﬁce in San Francisco. He subsequently opened the Rowayton ofﬁce. Among Albourne’s U.S. clients is the UCLA Foundation, which supports the University of California at Los Angeles with a $1 billion investment fund. Over the past four years, the foundation has upped its stake in hedge funds from 9 percent to more than 25 percent and now invests primarily in individual hedge funds rather than funds of funds. George Letteney, the foundation’s investment coordinator, says UCLA decided to build its own hedge fund portfolio partly to escape the fees associated with funds Photo by Peter Blakely/Redux for Alpha 82 • INSTITUTIONAL INVESTOR’S ALPHA • APRIL 2008

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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