Institutional Investor's Alpha Magazine - July/August 2008 - (Page 23)

Why have U.S. investors historically been so hostile to managed futures? What does that mean for investors? In the old days they weren’t. What you saw in the U.S. from around 2002 to 2004 was that almost all the bigger managed-futures names were experiencing performance problems. The U.S. ﬁrms were typically headed by a ﬁnancial guy with some quantitative experience, whereas the European funds were headed by quant guys who had built out large research teams, and they performed much better. But the ﬁrms in Europe that were good were not out there on the marketing side. So investors in the U.S. just got out of [managed futures]. When I was here in 2004, I was talking to consultants about our managed-futures positions; I had three fund-of-hedge-funds competitors sitting next to me, and they all said they did not need managed-futures exposure. Now they need it, and they’re going to have to build it up. Do you see U.S. demand for structured products increasing? They have to brutally shift their asset allocation. They need to reduce equity and bonds signiﬁcantly, and they need to increase their allocations to alternative asset classes that can do well in this environment. Such as? Commodities and environmental strategies should do well, and some types of hedge funds, especially in distressed as well as managed futures, will do well. Real estate is difﬁcult right now, but there will be opportunities later on. Are investors reacting fast enough? Some of them are not. They are still moving money into private equity instead of hedge funds. And even within hedge funds, allocations to equity hedge and event-driven are still dominating. Why is environmental investing suddenly so popular? Clearly there is much less of an institutional market in the U.S. for these types of products. Institutionally, we see more interest in Germany and other countries, where investors are just starting to enter the market, where they want to be more secure and take on less risk. In the U.S. you see less of that. Why? When most professional investors in America go into a certain asset class, they want to take the risk of that asset class. Considering how rooted Man is in structured products — a tough sell in the U.S. — how can you excel here? What you see on the environmental side is strongly connected to the commodities cycle. During the very high commodities prices of the 1970s, people were interested in environmental investing. Then you had the 1980s and the 1990s, when all those commodities prices were coming down a lot — and there was less interest. There is something structurally different this time around. The world’s population has been signiﬁcantly increasing, and we are getting out of a normal commodities cycle, and we are getting out of a normal environmental cycle. We are now getting to a place where the world needs to be much more focused on the environmental issues on a more permanent basis. This is going to increase asset allocations to the sector for the long term. Do environmental funds — like those that focus on carbon-emissions trading — really help the environment or just their investors? There are a lot of things we can offer. One of the demands right now is a one-account platform where you have all of your hedge fund investments — be they funds of funds or hedge funds. We can offer that. We don’t offer solutions on the risk management side yet. But on the reporting side, we can offer something that isn’t yet being offered out there by other hedge funds. This is how we can be on the forefront of the business, by making sure we are offering solutions to the institutional investor. Has Man been hurt by the credit crisis? The impact on our portfolio was minor; we actually profited signiﬁcantly from many of our investments in the space. We had been positioned for a crisis in credit for a long time. Do you think investors are asking the right questions? With the case of carbon-emissions trading, you need to put a price on pollution, and there are different ways you can handle that. Having carbon credits is one of the solutions, and it is working. Since the 1990s the U.S. has been successfully operating several cap-and-trade systems to ﬁght environmental problems such as acid rain and smog. So I believe it is the right product. Will there be some traders on Wall Street making money on it? Absolutely, but I believe it is the right market mechanism. The interest of environmental proponents and investors are largely aligned here. Why does Man even need the U.S., considering it has nearly $80 billion in assets already? People are talking too much about the credit crisis. It is about getting the overall macro picture right. Investors need to spend more time thinking about where we are in the world right now. When I am talking to investors, I’m talking about commodities and inﬂation, and I’m talking about the 1970s. We are in a 1970s kind of environment — going from a time of greed to fear. This is the largest market in the world. Why should we not be here? As an industry leader, we have to be in the U.S.! What’s your ultimate goal? For Man Investments to be the ﬁrst call in the industry. If an investor is having a speciﬁc issue with their alternatives portfolio, I want that person to call us. JULY/AUGUST 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 23

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

Institutional Investor's Alpha Magazine - July/August 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Mr. Big Goes Small The Good Guys: Adopt This School! Interview: Man's Great Hope Cover Story: The Gentleman Activist Strategies: The New Bankers Profile: Staying Alive Research Center: The Best of the East The Asian Sensations Alpha Bytes: Into the Light Unhedged: Commentary: Speculating on Washington

Institutional Investor's Alpha Magazine - July/August 2008

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