Alpha - September 2007 - (Page 16)

ing Internet gambling, arguing that the state should not meddle in this form of private entertainment. Frank’s laissez-faire and dirigiste instincts are somewhat at odds when it comes to hedge funds. Early in his chairmanship, he gave a green light, sort of, to qualified investors’ using nonregulated funds. “If you’ve got $10 million and you want to invest in a hedge fund, smoke three packs a day and ride your motorcycle without a helmet, good luck to you,” he told Business Week in February. He has been less relaxed about pension fund money streaming into alternative investments. He joined Democratic and Republican colleagues in tagging this issue for scrutiny during a March hearing. Nothing concrete has come of their concern so far. Which of Frank’s instincts wins out depends signiﬁcantly on whether the echoes of the subprime meltdown amplify or peter out over the next few months. As Alpha was going to press, Frank was preparing to hold another hearing on the mortgage market that he promised would look at the larger issue of financial innovation and regulation. With markets stabilizing in early September and no new fund collapses in the headlines, hedge fund professionals have felt increasingly optimistic about dodging another regulatory bullet. “It seems like the noise is dying down; more people can see that this was a market correction, and life goes on,” says Bull Dog’s Goldstein. — Craig Mellow Corrections In the July/August “The Good Guys” column, the Sydney, Australia–based fund of hedge funds that is now known as Ashton Funds was identified by its previous name, and the name of the company’s CEO, Nicholas Raphaely, was misspelled. Additionally, Jasper Lewitton was identiﬁed by the wrong title. He is head of business strategy development for UBS Wealth Management, U.S. CLASS REVIEW Distressed Securities M any hedge fund managers embrace market volatility for the investment opportunities it can create. But most distressed-securities funds were caught off-guard by this summer’s choppy market. In July, Chicago-based Hedge Fund Research’s HFRI distressedsecurities index dropped 0.40 percent, trailing the 0.45 percent monthly returns generated by the HFRI fund-weighted composite index but still faring better than the 3.10 percent loss experienced by the Standard & Poor’s 500 index. July’s leading distressed fund was Harbert Fund Advisors’ $6 billion Harbinger Capital Partners Offshore Fund I, whose long-short approach to event-driven situations garnered returns of 19 percent for the month. The Top Performers Return YTD through July One-year through July Annualized three years through July Fund* Firm Fund assets ($ millions) July Harbinger Capital Partners Offshore Fund I, Ltd. Forum Absolute Return Fund, Ltd. Catalyst Credit Opportunity Fund Offshore, Ltd. Avenue Asia Investments, LP Momentum Debt Master Fund Concordia Distressed Debt Fund, LP Asian Debt Fund – Class A MG Collateralized Debt Fund Outrider Offshore, Ltd. QBridge China Fund HFRI distressed-securities index HFRI fund-weighted composite index Standard & Poor’s 500 index Harbert Fund Advisors LW Asset Mgmt Catalyst Investment Mgmt Co. Avenue Capital Group Pioneer Alternative Investment Mgmt Concordia Advisors Finansa Singapore Magnum Global Investments Outrider Mgmt QBridge Investment Mgmt $6,020 185 104 294 254 145 99 53 83 83 19.08% 3.96 2.79 2.30 2.21 2.13 1.46 1.40 0.98 0.90 –0.40 0.45 –3.10 49.69% 10.41 15.72 7.45 10.26 7.27 8.32 9.34 7.26 9.54 6.68 7.95 3.64 62.10% 7.64 21.07 2.24 18.36 14.97 15.07 21.47 12.86 — 14.06 15.15 16.12 29.64% 8.59 12.58 5.93 12.90 11.23 16.07 — 14.78 — 13.76 12.63 11.75 * Funds with $50 million or more in assets under management that have reported returns to Hedge Fund Research. Source: Hedge Fund Research. The next best performer, LW Asset Management’s Forum Absolute Return Fund, a long-short emerging-markets fund focused on distressed debt, generated returns of 3.96 percent. “Most of the indexes were down in July, so our positive performance had to do with how we hedged our portfolio,” says Jose Pedreira, who manages the Forum Absolute Return Fund. Pedreira attributes its positive performance to fundamental analysis and a strong selection of credits to short. Catalyst Investment Management Co.’s Catalyst Credit Opportunity Fund Offshore also fared well in July, ending the month up 2.79 percent. David Keily, head of marketing for the firm, believes because the fund is small, with $104 million in assets, it can be nimble and move easily between long and short positions with little market impact. Stock picking was also important for the fund, which does not use leverage. “We found success in singlename credit picking, both long and short,” says Keily. While many funds aggressively shorted subprime mortgages in the ABX index, Catalyst limited its shorting of the index to 15 percent of its portfolio. — F.D. 16 • INSTITUTIONAL INVESTOR’S ALPHA • SEPTEMBER 2007

Table of Contents Feed for the Digital Edition of Alpha - September 2007

Contents Letter from the Editor Longs & Shorts Pension Corner: Keeping the Faith The Good Guys: Going Public Interview: Barry Bausano - A Delicate Balance Cover Story: Cruel, Cruel Summer Profile: Phil Cooper - Alternative Flight Plan Strategies: Marshall Wace - TOPS in Its Field Profile: Fortis Investments - Banking on Alternatives Research Center: Top Equity Trading Firms Alpha Bytes: Desktop Duel Unhedged: Commentary - The Taxman Cometh

Alpha - September 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.