Institutional Investor's Alpha Magazine - September 2008 - (Page 12)

tiv, a New York–based hedge fund with $250 million in assets under management, pays for massages and spa days for employees in addition to encouraging them to meditate. “During relaxation time people have a chance to get their thoughts in order and become more organized,” says senior managing director Ethan Gray, who oversees offexchange trading operations for European and Asian portfolios. At D.E. Shaw & Co., a $39 billion New York– based firm, stress remedies include lunchtime yoga classes, after-hours wine tastings and book clubs that focus on ﬁnance-related bestsellers. Scoreboard Hedge fund returns by strategy, sorted by investment process, asset class and geographic focus, through July 31, 2008. July return Composite, equally weighted Composite, asset-weighted PROCESS GROUP YTD return –4.00% –2.63 2.44 7.69 –3.40 –1.90 –2.32 –4.55 –3.74 1.11 –0.83 –0.17 –3.50 –7.84 –11.02 –1.20 –4.00 9.64 –2.76 –4.33 –1.74 –4.23 –4.33 –3.89 –6.72 –3.17 1.73 1.71 –1.88 –3.64 –2.63 –6.53 2.70 –10.47 –13.14 –8.71 3-month 12-month return return –1.76% –1.03 –0.21 0.98 –1.73 –0.50 –0.64 –1.63 –0.62 –0.21 0.02 0.04 –1.46 –3.21 –4.97 0.27 –0.78 5.41 –0.43 –1.98 1.00 –1.76 –2.06 –0.95 –2.72 –0.52 –0.32 –0.11 –0.65 –1.24 –0.24 –2.78 –0.02 –5.48 –6.36 –4.06 –1.97% –0.03 7.14 13.04 0.66 –0.68 –0.08 –3.87 –1.96 4.14 –0.88 –2.21 1.33 –6.03 –9.58 0.85 –0.99 14.86 –2.29 –2.92 –2.39 –3.74 –3.14 –5.18 –5.05 –2.48 5.64 2.79 –0.38 –5.48 –0.86 –10.93 6.86 –6.44 –12.67 –5.45 –2.34% –2.77 –2.93 –3.73 –2.23 –0.96 –0.99 –2.66 –0.43 –0.76 0.81 –1.40 –1.20 –2.75 –3.19 –1.81 –2.33 –0.60 –1.63 –3.14 –0.54 –1.82 –2.08 –1.09 –2.46 –0.96 –2.54 –0.28 –2.06 –1.87 –1.76 –1.98 –2.73 –3.89 –2.06 –2.58 Directional trading Systematic trading Discretionary trading Relative value Arbitrage Convertible arbitrage Fixed-income arbitrage Mortgage-backed arbitrage Merger arbitrage Statistical arbitrage Multiprocess Security selection Long bias No bias Variable bias Short bias Specialist credit Distressed securities Long-short credit Multiprocess group Multiprocess Event-driven ASSET CLASS INDEXES Peter Kuperman, manager of tiny San Francisco–based QED Benchmark Fund ($9 million in assets under management), practices Bikram yoga and swing dancing each week. His favorite way to relax is to prepare an elaborate dinner, a skill he learned last summer when he took 24 cooking classes in ten weeks to impress a now-ex-girlfriend. Employees of $150 million-in-assets Portal Capital are encouraged to participate in ﬂag football, volleyball, running and bodybuilding. The Tualatin, Oregon, ofﬁce has a basketball hoop on the premises, where, says operations manager Forest Nesbitt, “I’ll oftentimes take a ‘recess’ and just head back there and shoot some hoops.” The key isn’t what you do to blow off steam, but that you do it, says New York–based psychiatrist and author Ari Kiev, who works with finance types on stress-reduction techniques. “Any kind of recreational activity that gives you a chance to get a break and reenergize is important,” says Kiev, whose clients include Steven Cohen’s SAC Capital Advisors. “What works can vary from person to person.” — Gwen Moran After many Tudor years, James Pallotta moves on. The End of the Affair W Equity Fixed income Diversiﬁed Currencies GEOGRAPHIC AREA Developed markets Europe North America Japan Developed markets, diversiﬁed Emerging markets Combined Asia-Paciﬁc Global markets Source: MSCI. hen Paul Tudor Jones II hired James Pallotta to create a global equity investing business for Tudor Investment Corp. in the early 1990s, the company trumpeted Pallotta’s bona ﬁdes: “What stands out is his risk control.” Time proved Tudor right. From 1993 through 2006 the funds that Pallotta managed returned, on average, 16 percent a year. Pallotta, 50, ran as much as $11 billion during that period. Then came 2007, when his ﬂ agship Raptor Fund was off 7.8 percent, leading investors to pull more than $1 billion and leaving him with about $7.5 billion in total assets in all the funds he ran at Tudor. This year, as of late August, Pallotta’s overall performance is off a further 10 percent, and the defections have increased, leaving him with $5 billion. Neither Pallotta nor Jones would talk about the situation, but the losses and withdrawals are said to have made Jones uneasy, and this summer Tudor announced that they had agreed to part ways. The firm said in August that Pallotta would open a new ﬁrm in January to focus initially on public equities and over time build a mix of public and private investments. One investor who has money with Tudor says Pallotta’s long view of the markets clashed with Jones’s penchant for short-term trading. Indeed, in the summer of 2007, Jones persuaded Pallotta to reduce his investment exposure as soon as the drawdowns occurred, only to see many of the positions that had suffered losses rebound shortly afterward. “That’s not how Pallotta invests,” notes the investor, who expects Pallotta’s new fund to have longer lockups. “He was disappointed that older investors pulled out without the courtesy of a phone call,” says Rodney Berens, founding partner of New York–based Berens Capital Management, which runs $1.2 billion in single-manager and multimanager hedge funds. Berens has met a few times with Pallotta but does not have money with him or Tudor. “He is reexamining what kind of business he wants to run.” — Stephen Taub 12 • INSTITUTIONAL INVESTOR’S ALPHA • SEPTEMBER 2008 BILL BRETT/BOSTON GLOBE

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - September 2008

Institutional Investor's Alpha Magazine - September 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Culling the Herd The Good Guys: Ending the Cycle Interview: Press Credentials Cover Story: Rethinking Chris Hohn Strategies: At the Edge of the Earth Profile: Alpha Femals Strategies: Tails, You Lose Research Center: The Top Equity Trading Firms Alpha Bytes: The Light Is On Unhedged: Commentary: Not-So-Dire Diagnosis

Institutional Investor's Alpha Magazine - September 2008

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