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

(continued from page 5) Kim faces a tough challenge to establish his new venture. But he has recruited some top-notch talent to get the ﬁrm started. In addition to hiring David Milich, who had run Merrill’s Americas prime brokerage division, as COO, Kim has enlisted Warren Silver, formerly a portfolio manager with Ziff Brothers Investments in New York, to run longshort equity. Michael Pasternak, a former Goldman Sachs Asset Management portfolio manager, will oversee longshort credit. (Pasternak had most recently co-founded his own hedge fund ﬁrm, Pinewood Capital Partners, which subsequently shut down.) Kim has also hired Karl Wachter as general counselor. He previously was a co–general counselor at Amaranth Advisors, the Greenwich, Connecticut–based hedge fund that shut down in October 2006 after suffering more than $6 billion in losses from natural-gas trading. Before joining Amaranth, Wachter had spent three years as an associate with law ﬁrm Cleary Gottlieb Steen & Hamilton in New York. The falling-out with Kim may prove a setback for Merrill’s newly appointed CEO, former NYSE Euronext head John Thain, as the investment bank tries to bolster its hedge fund business. Merrill had made a number of moves over the past two years in a bid to catch up with its Wall Street rivals. In October 2006, Merrill, which declined to comment for this story, took a minority stake in DiMaio Ahmad Capital, the New York–based credit fund founded by former Credit Suisse fixed-income traders Jack DiMaio and Nasser Ahmad. And in May it agreed to buy a minority stake in GSO Capital Partners, an $8 billion hedge fund run by a team of former Credit Suisse First Boston bankers. According to people familiar with the matter, discussions about a possible Merrill investment in Diamond Lake came to a halt in August after the two parties could not agree on terms. One thing is certain: Given all this backstage drama, Kim’s will be one of the most-watched hedge fund launches of the coming year. — I.R-S. CLASS REVIEW Event-Driven Funds N othing lasts forever. Event-driven hedge funds have benefited from cooperative financing markets during the past three years, but creditors’ decreasing risk appetite in the third quarter made September a difﬁcult month for the strategy. Chicago-based Hedge Fund Re- search’s HFRI event-driven index returned 1.70 percent in September, trailing the 2.71 percent monthly return generated by the HFRI fundweighted composite index and well behind the 3.74 percent gain of the Standard & Poor’s 500 index. Still, a handful of funds did man- age to post impressive returns. Toronto-based Rosseau Asset Management’s G10 – Rosseau Special Situations Fund (which is managed by the firm’s Cayman Islands subsidiary) was up an impressive 16.22 percent in September. The U.S.dollar-denominated fund — which Top Performers Fund* Firm Fund assets ($ millions) 9/1– 9/30 RETURN (%) YTD One year through through 9/30 9/30 Annualized three years through 9/30 G10 – Rosseau Special G10 Global Asset Mgmt Situations Fund, Ltd. Rosseau LP Rosseau Asset Mgmt MMCAP Fund MMCAP Capital ChinaFund, LP Dragon Financial Capital DB Alpamayo Emerging Deutsche Asset Mgmt Markets Value Fund, Ltd. Highland CDO Opportunity Highland Capital Mgmt Fund, Ltd. DKR Capital Atalanta/ DKR Saturn Event Driven Program Sosnoff Sabre Partners, LP Capital Corp. York Asian Opportunities Fund, LP York Capital Mgmt Venus Special Situations Fund, LP Venus Capital Mgmt HFRI event-driven index HFRI fund-weighted composite index Standard & Poor’s 500 index $ 60 168 298 52 240 536 50 109 130 90 16.22% 11.09 9.01 8.86 7.82 6.84 6.33 6.32 5.90 5.09 1.70 2.71 3.74 3.17% –8.67 21.68 23.71 20.79 13.21 17.46 4.36 31.64 18.39 7.35 8.80 9.13 19.77% 10.46 32.94 33.53 31.56 30.10 20.31 6.70 79.30 28.79 13.75 14.69 16.43 — 40.13% 34.08 25.80 — 28.18 8.01 10.26 — — 12.97 12.27 13.12 *Funds with $50 million or more in assets under management that have reported returns to Hedge Fund Research. Source: Hedge Fund Research. was launched in January 2006 and invests para passu with the firm’s Canadian-dollar flagship Rosseau fund — invests in corporate restructurings, turnarounds, unique growth situations and market anomalies. “Going into August we saw valuations were going too high, and we started to build cash,” says portfolio manager Warren Irwin. During the tumultuous summer, Irwin was able to deploy that cash as valuations became favorable. Recently, Rosseau has been focusing on opportunities related to the natural-resources sector, taking advantage of Toronto’s role as a global center for mining ﬁnance. MMCAP Capital, another firm based in Toronto with mining-related investments, generated the thirdhighest returns for the asset class. MMCAP Fund was up 9.01 percent. Matthew MacIsaac, co– portfolio manager, credits the strong performance to a “part hostile, part friendly three-way merger involving two gold companies and a copper producer.” Although spreads widened as the deal seemed doomed, when it came to fruition in September, MMCAP’s big position was a winner. — Frances Denmark 16 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2007

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

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

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