Alpha - September 2007 - (Page 51)

Proﬁle Phil Cooper Alternative By Udayan Gupta Flight Plan F or several years in the late 1990s and early 2000s, the titans of the private equity industry gathered on a beach in Nantucket, Massachusetts, in June for the Goldman Sachs Private Equity Convocation and Clambake. Attendees arrived on the island on a Monday evening and congregated under a tent by the ocean, feasting on lobsters, clams and crabs. The rules were simple: No ties, no slides, no press. Everybody wore Nantucket red and served themselves. The next morning the group reconvened under a tent at the White Elephant hotel and split up into panels to discuss alternative investments. By the end of the day, they were gone. After the ﬁrst clambake in 1998, word quickly spread about the event’s low-key nature, high-level discussion and superstar guest list, which included many of the best private equity managers in the world. By 2003 the clambake was attracting such industry leaders as Blackstone Group’s Stephen Schwartzman, Leon Black of Apollo Advisors and Thomas H. Lee Partners’ Scott Sperling, as well as rising stars at Goldman-backed funds, such as Rodger Krouse and Marc Leder of Sun Capital Partners and Jon Moulton of Alchemy Partners. The event became so big that ofﬁcials from Nantucket Memorial Airport complained to Goldman that the swarm of private jets was causing ﬂight delays. The clambake was the brainchild of Philip Cooper, the founder and then-head of Goldman Sachs Private Equity Group, who kept up an informal atmosphere throughout by treating even the most powerful guests with seeming irreverence. “Only Phil Cooper could pull off such an event,” says Christer Jörneskog, head of private equity for AFA Insurance in Stockholm, Sweden, and an investor in Goldman’s private equity funds during Cooper’s reign. “It was the perfect place to test his disruptive thinking.” Now three years removed from Goldman Sachs, Cooper has a truly disruptive message for investors. He claims that 80 percent of alternative-investment funds deliver lower returns than equity indexes — with far less liquidity and more volatility. The statement jars, especially coming from one who built an alternative-investment platform at Goldman that now boasts more than $25 billion in assets. But as Cooper sees it, the situation is simPhil Cooper, the founder ple: Alternative-asset classes are becoming too efﬁcient. of Goldman, Sachs & In Cooper’s view the only way to generate conCo.’s private equity sistently superior returns in group, is dismantling today’s market is to identify investment opportunitraditional asset classes ties in which inefficiencies have not yet been trampled in his new investment — in effect, to do in the alternative-asset classes what management company, alternative managers once but are institutional did in traditional investment management. In the investors ready to open current environment the most successful managers their checkbooks? will be those with the ﬂexibility to pursue opportunities wherever they arise, regardless of asset class or strategy. Cooper thinks he has built the perfect model for this market in Lincoln Vale, a multiproduct investment management company in Lincoln, Massachusetts, that offers hedge funds, private equity funds and hybrids of the two. “You can’t sustain high returns when too many players get in the game,” he says. “There isn’t too much money chasing too few deals, there is too much money chasing the same types of deals and too little money going where the others aren’t.” For many hedge funds — and their unsuspecting investors — that reality became all too clear this summer, when the meltdown in the U.S. subprime mortgage secSEPTEMBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 51

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

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