Alpha - September 2007 - (Page 6)

James Rogers: Making the move into China’s energy market. “If you can speak Chinese and you know about commodities, you are going to be one of the most successful people in the world in the next 20 to 30 years,” says James Rogers, who created the Rogers international commodities index and earlier co-founded the famed Quantum Fund with George Soros in 1970. Rogers, who currently serves as a guest professor of ﬁnance at Columbia University in New York, is so optimistic about the long-term prospects of Chinese energy holdings that he has put his Manhattan town house up for sale and plans to permanently relocate to China. Last year energy usage rose 8 percent in China, according to the BP Statistical Review of World Energy 2007. With the country’s urban population continuing to grow, demand is likely to increase, making energy companies, such as China National Offshore Oil Corp., incredibly attractive investments. With a large cash position and negligible debt, CNOOC, like many Chinese utilities, boasts a price-earnings ratio of less than 10 and a 3.7 percent dividend yield. “China has an unquenchable thirst for energy, and CNOOC is busy supplying it,” says economist Mark Skousen, who teaches ﬁnance courses at Columbia. One of the biggest investors in CNOOC is East Setauket, New York–based hedge fund ﬁrm Renaissance Technologies. Another investor that has been taking large positions in China’s energy market is Chicago-based Citadel Investment Group, which recently invested $28 million in convertible bonds issued by Beijing’s China Shen Zhou Mining & Resources. The downside of China’s conspicuous fuel consumption is an environmental crisis of alarming proportions. Sixteen of the 20 most polluted cities in the world are in China, according to the World Bank — the result of underregulated industrial activity and low automobile emissions standards. But with the 2008 Summer Olympics in Beijing just around InvestorForum Fees are a major factor in an institutional investor’s decision about whether to allocate assets to hedge funds. More than half of the respondents to our latest InvestorForum survey of pension, endowment and foundation investment ofﬁcers that do not invest in hedge funds cite high fees as an important reason. Moving forward, however, investors are optimistic that fees will be reined in. Nearly 53 percent of respondents expect them to go down over the next ﬁve years.* What type of institution do you represent? Corporate pension fund Public pension fund Taft-Hartley pension fund Endowment Foundation Other What is the size of your fund? More than $5 billion $2.50 billion to $5 billion $1 billion to $2.49 billion $500 million to $999 million $100 million to $499 million Less than $100 million Yes No 37.0% 18.5 2.5 35.8 2.5 3.7 40.5% 59.5 If you invest in hedge funds, what is the highest performance fee among your managers? 20 percent or less 83.3% 21 percent to 25 percent 13.3 26 percent to 30 percent 0.0 31 percent to 40 percent 3.3 Greater than 40 percent 0.0 If you invest in hedge funds or funds of hedge funds, do the fees include a high-water mark? Always 46.7% Sometimes 33.3 Never 20.0 If a hedge fund is able to demonstrate the ability to consistently generate alpha, should the richness of its fees be a factor when choosing to allocate to it? Yes 61.4% No 22.7 Don’t know 15.9 If you have chosen not to invest in hedge funds, is the fee structure associated with these managers an important factor in your decision? Yes 54.3% No 25.7 Don’t know 20.0 If you do not invest in hedge funds, would you consider investing in a hedge-fund-like product with a lower fee structure, such as a 130-30 fund or a synthetic hedge fund index? Yes 41.4% No 31.0 Don’t know 27.6 What do you expect will happen to hedge fund fees during the next ﬁve years? They will go up. 13.2% They will stay the same. 15.8 They will go down. 52.6 Don’t know 18.4 * Responses may not total 100 percent because of rounding. 8.5% 13.4 22.0 17.1 22.0 17.1 If you do invest in hedge funds, how big is your hedge fund allocation? More than 50 percent 2.6% 26 to 50 percent 18.0 16 to 25 percent 15.4 11 to 15 percent 12.8 6 to 10 percent 23.1 Less than 6 percent 28.2 Are hedge fund fees in general too high? Yes 68.8% No 7.5 Don’t know 23.8 If you invest in hedge funds, what is the highest management fee among your managers? Less than 2 percent 34.3% 2 percent 62.9 3 percent 0.0 4 percent 0.0 Greater than 4 percent 2.9 Do you currently invest in hedge funds or funds of hedge funds? Yes 46.3% No 53.8 If you answered “no” to the previous question, are you considering investing in hedge funds or funds of hedge funds in the future? 6 • INSTITUTIONAL INVESTOR’S ALPHA • SEPTEMBER 2007 Photo by Rayon Richards for Alpha

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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