Alpha - September 2007 - (Page 73)

approximately $1.23 billion in assets under management, CAST is the core of Cadogan’s equity-oriented strategy. According to investors, it has achieved low-double-digit annualized returns since inception, with bondlike volatility and a beta of close to zero. (Cadogan executives decline to comment on details of the ﬁrm’s funds.) Cadogan kicked off its institutional business by snagging a major U.K. insurance company. But the ﬁrm’s ﬁrst large institutional presence was in Japan, where it became the second fund of hedge funds to enter the market. Cadogan has also had institutional investors in Australia, France, Germany, Korea, the Netherlands and the U.S. Today institutions — Fortis’s private banking customers aside — make up about 90 percent of the firm’s client base. Half of Cadogan’s institutional assets under management are U.S.–based. Clients include the Alaska Retirement Management Board, Baltimore Fire & Police Employees’ Retirement System, Briggs & Stratton Retirement Plan and Knoxville City Employees’ Pension Plan. Even as competitors were growing by leaps and bounds, Cadogan expanded slowly. Leaf attributes this to the ﬁrm’s emphasis on risk-adjusted returns and his refusal to hire anything more than a small marketing department. “We’re not a marketing shop,” he says. “I don’t even want to be known as an allocation shop. I want to be known as an investor.” Since the inception of CAST, Cadogan has diversiﬁed by floating a handful of new funds. Launched in March 2002 and geared to new managers in equities and credit, the Undiscovered Managers fund has about $290 million in assets under management. Outside the equity-oriented group, the oldest strategy is the Kurihama Japan Fund, with about $170 million in assets under management. Cadogan launched the fund in October 2002 at the request of one of its largest clients, a big European bank that wanted a Japan-focused fund of hedge funds. Among Cadogan’s more recent products is the $35 million Cadogan Ranunculus Fund, which was launched in October 2003. According to sources, it cultivates earlystage managers. Leaf explains that emerging managers have been a differentiator for Cadogan from early on. “Our belief has been that over the long run, size is the enemy of performance,” he says. “We like finding small managers who are more nimble with whom we can have really strong relationships.” Cadogan’s quirks extend to its office in the Flatiron District of New York City; Leaf says the pleasant environment helps retain employees who could be working for bigger shops. The ﬁrm publishes a line of restaurant, hotel and bar guides for its clients. An oenophile, Leaf moonlights as a wine adviser for Henry’s End, a restaurant near his Brooklyn Heights home. Cadogan has a staff of more than 30 across its New York headquarters and London satellite ofﬁce, among them the three other co-owners: CIO Paul Isaac, director of research Michael Waldron and senior adviser Richard Collier. Isaac is an alumnus of Mabon, Nugent & Co. and its successor ﬁrms, where his roles included chief economist. Waldron is Photo by Tom Tavee for Alpha a former portfolio manager with L.J. Altfest & Co. in New York. Collier was senior managing director for real estate at Bear, Stearns & Co. after serving as managing director for real estate at Merrill Lynch & Co. Just this month, Cadogan hired John Trammell as president, a newly created po- sition, to help Leaf manage the firm and grow its brand globally. Trammell had been CEO of Bermuda-based fundof-funds Investor Select Advisors. Forward phased out his duties at Cadogan in 2000 and 2001 because of family health problems. He went on to manage money for high-net-worth individuals and institutional investors, the latter with Santa Monica, California–based investment management consulting ﬁrm Wilshire Associates. Three years ago Forward joined multifamily office Asset Management Advisors as a senior portfolio strategist specializing in hedge fund allocations. The firm, which was purchased by Atlanta-based SunTrust Banks in 2001, recently changed its name to GenSpring Family Offices. It has $11 billion in assets under management, including some $5 billion in alternatives. Forward remains close friends with Leaf, and he still has a soft spot for Cadogan. “They’re an anachronism, in a good way,” he says. “Of all the ﬁrms their size, they continue to be run by entrepreneurs. They still have a real personality.” The Fortis team had already approached several funds of funds when their investment banker, Merrill Lynch, “I don’t want to be known as an allocation shop. I want to be known as an investor,” says Cadogan cofounder and CEO Stuart Leaf. SEPTEMBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 73

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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