Institutional Investor's Alpha Magazine - October 2007 - (Page 16)

would be certiﬁed by the Gemological Institute of America and HRD — the coordinating body and ofﬁcial representative for Belgium’s diamond sector — but would facilitate their trade. Brokers would not have to pay for trades, but consumers could use the index, paying a 5 percent commission on purchases and 3 percent on sales. “There’s a shift of hedge funds going private equity in style, and there’s a lot more opportunity for alternative investment,” says Sirius’ Linsley, who adds that interest in the diamond futures index represents investors’ growing awareness of the diamond sector and the increasing popularity of alternative investments. “As long as the investor is confident in the pricing and significant players get involved, this is something people should definitely get involved with.” The index could also provide investors with the opportunity to hedge against portfolios of stones. “Clients may wish to raise cash on a portfolio of stones and could persuade banks to lend against this commodity as there starts to be some liquidity and transparency, but this will require some depth of market,” says Wilkinson. Rapaport’s index isn’t the only diamond investment opportunity to be announced this year. In June, Isle of Man–based Diamond Circle Capital registered to raise up to $400 million in an IPO for a diamond fund to be listed on the London Stock Exchange and managed by Lausanne, Switzerland–based Diapason Commodities Management. Just a month later, however, the IPO was postponed — a move that RBC Capital Markets’ Kilalea says shows some reluctance among investors. Jonathan Hughes-Morgan, chairman of London-based Occam Asset Management, says investors may be uncertain about the safety of investing in diamonds, compared with more tried-and-true jewelry-related commodities like gold and silver. “They aren’t seen as a stone with a significant value, and we are seeing demand for precious metals like gold rise massively with the wealth of emerging countries,” he says. — Sally Whittle CLASS REVIEW Equity Hedge Funds A ugust was a cruel month for many hedge funds. Funds dependent on pure stock selection did not escape the carnage, with hedge funds across the board down an average of 1.47 percent for the month — 297 basis points below the Stan- dard & Poor’s 500 index — according to data from Chicago-based Hedge Fund Research. As a group, equity hedge funds fared among the worst, falling an average of 1.69 percent — although they remain up 6.41 percent for the 12 months through August 31. Nonetheless, there were some stock pickers without mortgagerelated investments who managed to turn August’s market turmoil into a moneymaking opportunity. Gartmore Global Investments’ Japan longshort AlphaGen Tenro Fund rose an The Top Performers Return (%) YTD through August One-year through August Annualized three years through August Fund* Firm Fund assets ($ millions) August AlphaGen Tenro Fund Ltd. (Class A – USD) Linden Growth Partners, LP Malo Fund Emperor Greater China Fund The Master Fund (Cayman), LP ShareVest Partners, LP Ardsley Partners Renewable Energy Fund, LP Guardian I Ltd. Partnership Waterloo International Fund, Ltd. Tiedemann Falconer HFRI equity hedge index HFRI fund-weighted composite index Standard & Poor’s 500 index Gartmore Global Investments Linden Asset Mgmt Monam Emperor Investment Mgmt Water Investment Advisors Millburn Ridgeﬁeld Corp. Ardsley Partners Oak Group Waterloo Advisors Tiedemann Investment Group $ 57 61 75 260 100 102 55 55 62 453 14.30% 9.19 5.31 4.79 4.52 4.26 4.00 3.94 3.93 3.89 –1.69 –1.47 1.50 22.53% 12.95 4.17 56.12 11.03 5.02 29.25 13.38 –1.45 4.44 6.41 5.98 5.20 19.75% –5.45 6.05 102.98 17.78 15.00 46.67 12.40 –12.07 6.12 12.22 11.91 15.13 — 46.12% 7.91 57.40 — 11.05 — 5.59 –1.49 11.79 12.32 11.90 12.15 * Funds with $50 million or more in assets under management that have reported returns to Hedge Fund Research. Source: Hedge Fund Research. impressive 14.30 percent for the month of August. Tokyo-based portfolio managers Justin Bowles and John Stewart engaged in strategic shorting to take advantage of the market’s turbulence and offset the portfolio’s roughly 60 companies with market caps greater than ¥100 billion ($85 billion). “By shorting stocks in the insurance sector when things reverted, there were plenty of opportunities to take advantage of,” says Martin Phipps, the firm’s London-based head of alternative distribution. Another strong performer in August was the Linden Growth Partners fund, which generated a 9.19 percent gain for the month and was up 12.95 percent for the year. The fund’s strategy is to invest in companies — primarily in the energy sector — six to 18 months before they go public, continuing to put money in them through private investment in public equity (PIPE) transactions. “Typically, we purchase some kind of convertible security, a hybrid of debt and equity,” explains Lara Coviello, president of Linden Asset Management in Clarks Summit, Pennsylvania. Linden beneﬁted from its deep bench in the energy sector, which stayed strong in August, and refrained from any hedging or trading activity that month. — Frances Denmark 16 • INSTITUTIONAL INVESTOR’S ALPHA • OCTOBER 2007

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - October 2007

Institutional Investor's Alpha Magazine - October 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Applied Knowledge The Good Guys: Autism Advocate Interview: Nerves of Steel Cover Story: Ivy League Education Alpha Awards: Top Service Providers: Trying Times Strategies: Passage to India Profile: The Oracle of Irvine Alpha Bytes: Futurama Research Center: Funds of Funds 50 Unhedged: Commentary: Crisis? What Crisis?

Institutional Investor's Alpha Magazine - October 2007

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