Institutional Investor's Alpha Magazine - July/August 2008 - (Page 6)

Christianna Wood has moved her hedge fund incubation skills to the private sector. for the $150 billion CalPERS portfolio of global equities, has spent much of the past four months vetting new talent at New York–based hedge fund sponsor Capital Z Asset Management, where she became CEO in March. Wood admits that being in a position to observe the $2 trillion hedge fund industry during a period of market upheaval has been electrifying — not least because the opportunities to take equity stakes in high-quality hedge funds and work closely with their managers to reﬁne their business models are multiplying as credit evaporates. Since its inception in 1998, Capital Z has sponsored 17 hedge funds, taking equity stakes and acting as partner. Those funds now manage more than $12 billion collectively, and Wood is eager to build on that portfolio and take equity stakes in emerging managers across a diverse range of strategies. “A lot of people think emerging managers are riskier, but in many ways they’re not,” says the 48-year-old native of Rochester, New York. “While the ﬁrms may be young, their founders are often very experienced and ready to take the entrepreneurial plunge. We’re ready to be there with them.” It’s not the ﬁrst time Wood has been a mentor. In addition to overseeing global equities at CalPERS, she worked closely on its manager development and shareholder activist programs. She says she took the job at Cap Z for its entrepreneurial ﬂavor. “We sponsored a lot of hedge fund managers at CalPERS, and had a particular interest in that part of our business,” she notes. Wood says she’ll build on Cap Z’s hedge fund incubator business, which has helped start funds like Bostonbased LightKeeper Investments and Los Angeles–based Palmyra Capital Advisors, and its fund of hedge funds, which, investors say, has outperformed the Hedge Fund Research fund-of-funds composite index by about 400 basis points annually for the past ﬁve years. That history may serve the ﬁrm well as global equity markets turn bearish. “This environment has been challenging, but our managers are holding up well,” Wood says. “I’m really proud of their resilience.” — Loch Adamson InvestorForum Institutional investors, as a group, have mixed feelings about hedge funds. Witness our question to them on whether hedge funds have a positive or a negative effect on the overall market. The opacity of the hedge fund industry comes through in a couple of places; see the “don’t know” responses on the questions about the relationship between market turmoil and hedge funds. And guess which hedge fund blowup in recent years has become the most notorious? Which major hedge fund blowup would you say has had the greatest impact on the hedge fund industry in 25.8% the past ﬁve years? 15.0 Amaranth Advisors 25.3% 2.5 Bayou Group 2.1 40.0 Bear Stearns’ credit 5.8 Were hedge funds a major beneﬁciary hedge funds 61.1 10.8 of the subprime mortgage crisis? Sowood Capital Management 8.4 What is the size of your fund? Have hedge funds had a positive or a Yes 29.6% Other 3.2 More than $5 billion 13.6% negative effect on capital markets? No 31.3 During the past ﬁve years, which 11.0 $2.5 billion to $5 billion Largely positive 42.7% Don’t know 39.1 $1 billion to $2.49 billion 23.7 Largely negative 32.5 major hedge fund blowup would you Are regulated entities such as banks $500 million to $999 million 11.0 Don’t know 24.8 say has had the greatest impact on the more or less likely than hedge funds $100 million to $499 million 24.6 ﬁnancial markets? Are hedge funds a signiﬁcant source to be a source of market risk? Less than $100 million 16.1 Amaranth Advisors 13.7% of systemic market risk? More likely 20.2% Bayou Group 0.0 Do you currently invest in hedge funds Yes 53.4% Less likely 52.6 Bear Stearns’ credit or funds of hedge funds? No 22.0 Don’t know 27.2 hedge funds 83.2 Yes 60.7% Don’t know 24.6 Sowood Capital Management 1.1 Will we see a hedge fund blowup in No 39.3 Other 2.1 Are hedge fund managers a 2008 akin to Long-Term Capital If you answered no, would you invest signiﬁcant source of market liquidity? Management’s ten years ago? * Responses may not total 100 percent because of rounding. in hedge funds? Yes 48.3% Yes 31.9% Yes 27.7% No 30.5 No 43.1 No 72.3 Don’t know 21.2 Don’t know 25.0 What type of institution do you represent? Corporate pension fund Public pension fund Taft-Hartley pension fund Endowment Foundation Other If you do invest in hedge funds, how big is your allocation? More than 50 percent 1.4% 26 to 50 percent 8.1 16 to 25 percent 23.0 11 to 15 percent 20.3 6 to 10 percent 23.0 Less than 6 percent 24.3 Did hedge funds contribute signiﬁcantly to the collapse of the subprime mortgage market? Yes 22.9% No 44.9 Don’t know 32.2 6 • INSTITUTIONAL INVESTOR’S ALPHA • JULY/AUGUST 2008 Photo by Stephen Aviano for Alpha

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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