Institutional Investor's Alpha Magazine - October 2008 - (Page 73)

Profile Profile Permal Asset Management Cult M ost accountants who make it to the very top of their companies cling to a natural inclination to talk spread sheets and statistics. Not Isaac Souede. Ask the chairman and chief executive of Permal Asset Management about his favorite investments and he reels off a list of people — Louis Bacon, Bruce Kovner and Stephen Mandel Jr. — rather than the names of funds or sectors. Souede, whose New York–based 200-person ﬁrm manages nearly $40 billion in funds of hedge funds, is more psychologist and sociologist than number-cruncher. He makes no bones about the fact that he invests his time — and his clients’ money — in people who run great hedge funds, not just in the funds themselves. “The best managers are usually ones we have followed for a long time,” Souede says. “They might have spun out funds from other ﬁrms or come from the long-only space. If they are in our portfolios, it is likely we have gotten to know them well over a long period of time.” Souede and Permal’s 40-member investment team study in detail the strategies and styles of their managers, but they also devote an unusual amount of energy to exploring and analyzing their character and temperament. As the Permal CEO explains, the chemistry between managers who run a particular fund is critical: “The partners may get along well when the ﬁ rm is founded, but performance stress does funny things to people.” In more than 23 years at Permal, Souede has un- AT FUND-OF-HEDGEFUNDS GIANT PERMAL ASSET MANAGEMENT, THE TRIED-AND-TRUE EMPHASIS IS ON PICKING THE RIGHT PEOPLE, NOT JUST THE RIGHT FUNDS. By Phil Davis of Personalities earthed dozens of relatively unknown hedge fund managers. Some, like Mandel, the founder of Lone Pine Capital in Greenwich, Connecticut, which now has $18 billion in assets under management, have gone on to hedge fund fame. Others, including Tim Tacchi, senior partner of TT International, a $21 billion London-based ﬁrm with $3.7 billion in hedge funds, and Sandy Colen, of Orinda, California–based Apex Capital, which has about $3 billion in hedge funds, have largely managed to stay off most investors’ radar. Once Permal decides a manager has talent, the ﬁ rm tends to stick with him or her. Although Permal frequently resizes its positions in the more than 200 funds in which it invests, it rarely exits altogether. So when the partners of Colen’s previous ﬁ rm, Paciﬁc Equities, of Oakland, California, decided to split up in 1989, Souede didn’t have to think twice about investing with Colen in his new venture. “We knew he was very skilled, so we talked to him and decided to back him,” says Souede. “And we’ve now been with him for nearly 20 years.” The focus on ferreting out talent — and staying with it — has helped Permal grow from $250 million in assets under management in 1985, the year Souede was hired, to $38 billion as of the end of August. That makes it the ﬁfth-biggest fund-of-hedge-funds manager in the world. Permal’s people-driven approach has helped the ﬁrm weather what has been a tough year for most investors. Despite growing concerns about the health of hedge OCTOBER 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 73

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

Institutional Investor's Alpha Magazine - October 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Process of Evolution The Good Guys: Israel's Champion Interview: Fast Lessons for Hard Times Cover Story: Industry Under Siege The New Hedge Fund Economics Good-Bye, Easy Money Caging the Shorts Strategies: Bottom Fishing Profile: Cult of Personalities Research Center: Alpha Awards: Eye of the Storm Alpha Bytes: Funneling the Chatter Unhedged: Commentary: Attention, Hedge Fund Shoppers

Institutional Investor's Alpha Magazine - October 2008

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