Institutional Investor's Alpha Magazine - November 2007 - (Page 3)

Letter from the editor Extra! Extra! EDITOR Michael Carroll EDITOR Michael Carroll EXECUTIVE EDITOR Michael Peltz MANAGING EDITOR David Schutt INTERNATIONAL EDITOR Tom Buerkle U.S. EDITOR Jeffrey Kutler EDITOR-AT-LARGE Firth Calhoun ART DIRECTOR Nathan Sinclair ART DIRECTOR Irene Ledwith ASSISTANT MANAGING EDITORS Tom Johnson (Research), William Loob (Editorial Production), ASSISTANT MANAGING EDITORS Lewis Knox Sathya Rajavelu (Director, (Global Technology and (Research), Jeffrey Kutler Research Operations Group), Justin Schack (Wall Street, Corporate Finance) Banking), Deborah F. McClellan (Editorial BUREAU CHIEF Kevin Hamlin (Hong Kong) Production), Barbara Rudolph (Money Management) SENIOR EDITORS Loch Adamson (London), EUROPEANBrull (LosTom Buerkle B. Kenney Steven EDITOR Angeles), Jane (London) (Editorial Research), Britt Erica Tunick, BUREAU CHIEF Kevin Hamlin (Hong Kong) JoWrighton (Paris) SENIOR EDITORS Steven Brull (Los Angeles), SENIOR WRITERS Frances Denmark, Michael Shari Andrew Capon (London), Jane B. Kenney STAFF WRITERS Dan Freed, David Lanchner (Paris), (Editorial Research) Imogen Rose-Smith, Julie Segal SENIOR WRITERS Deepak Gopinath,Ewing SENIOR ASSOCIATE EDITOR Tucker Justin STAFF WRITERS RichSivert Hagen, ASSOCIATE EDITORS Blake, David Schack Lanchner (Paris) SENIOR ASSOCIATE EDITOR Tucker Ewing (Research Specialist), Timothy Roberts (Research ASSOCIATE EDITORS Emily Fleckner, Sivert Hagen Specialist), Carolynn B. Tetro COPY CHIEF David Wray SENIOR CONTRIBUTING EDITORS Fran Hawthorne, SENIOR CONTRIBUTING EDITORS Fran Hawthorne, CONTRIBUTING WRITERS Pam Abramowitz, (Tokyo), Stephen Taub, Joan Warner John Livingstone, WeiQing Lu Harvey D. Shapiro, Stephen Taub Hal Lux, Harvey D. Shapiro, Charles Smith Danielle Beurteaux, John Aidan Byrne, CONTRIBUTING EDITORS Colin Barraclough, Phil Davis, Udayan Gupta, Scott Martin, Neil O’Hara, Jaye Scholl, Irwin Speizer Lucy Conger (Mexico City), Jonathan Kandell, COPY DEPARTMENT DeputyKazuhiko Shimizu Lois Madison Reamy, Copy Chief: Bill Christophersen; Copy Editors: Ingrid Accardi, (Beijing), Leah Nathans Spiro COPY DEPARTMENT Deputy Copy Chief: Jeff Cranmer ASSISTANT TO THE EDITOR Elizabeth Simroe ASSISTANT TO THEDeputy Art Elizabeth Simroe ART DEPARTMENT EDITOR Director: Diana Panﬁl; Senior Designer: Lee H.Wilson; ART DEPARTMENT Deputy ArtPhoto Editor: Daniella Nilva; Associate: Sabrina Henley; Director: Patrizia Bove; Associate Photo Editor: Stephanie Lora; Photo Editor: Art Director: Alden Gewirtz; Color Imaging Manager: John Miliczenko Anastasia Pleasant; Color Imaging Manager: Ruth Hamel, Veronica Majerol John Miliczenko CHAIRMAN & CEO Gary Mueller GROUP PUBLISHER Christine Cavolina PRESIDENT & CEO Christopher R. Brown PUBLISHER Joy DeSanto PUBLISHER, INTERNATIONAL Spencer Wicks PUBLISHER Christine Cavolina PUBLISHER, ASIA Wendy Gallagher PUBLISHER, INTERNATIONAL Lisa Traeger ONLINE SALES DIRECTOR Chris DeAngelis EDITOR AND PUBLISHER, Brian Gill PRODUCTION DIRECTOR SPECIAL PROJECTS Ernest McCrary MANAGING DIRECTOR OF Brian Gill PRODUCTS PRODUCTION DIRECTOR RESEARCH DIRECTOR Murrell Denise OF FULFILLMENT Robert Tonchuk CHIEF OPERATING OFFICER David E. Antin DIRECTOR OF FINANCE AND OPERATIONS Institutional Investor’s AlphaTM and Alpha,TM 225 Park Avenue South, David E. Antin New York, NY 10003; (212) 224-3300; Fax: (212) 224-3171. © 2007 Institutional AlphaTM and Alpha,TM 225 Park Avenue South, Institutional Investor’s Investor, Inc. No statement in this magazine is to be construed as a recommendation to Fax: (212) 224-3171. New York, NY 10003; (212) 224-3300;buy or sell securities. Neither this publication nor any part of it may be reproduced or transmitted in any form or by any means, Inc. (USPS 581-660) No including © 2003 Institutional Investor, electronic or mechanical, statement photocopying, recording or by any as a recommendation to buy or in this magazine is to be construedinformation storage and retrieval system, without the prior written permission of part of it may be resell securities. Neither this publication nor any Institutional Investor magazine. or transmitted in any Dewey Palmieri means,224-3675; produced For reprints, contact form or by any (212) electronic Fax: (212) 224-3563; e-mail: dpalmieri@iinvestor.com. Subor mechanical, including photocopying, recording or by any inforscription hotline (800) 437-9997; Overseas the prior written permation storage and retrieval system, without(44-20) 7779 8999 mission of Institutional Investor magazine. NOVEMBER 14 WAS A BUSY NEWS DAY for Wall Street. Merrill Lynch surprised investors by naming NYSE Euronext chief John Thain as its new chairman and CEO in hopes that the onetime mortgage bond executive can ﬁx the mess left by former Merrill CEO Stanley O’Neal. Bear Stearns announced that it would be taking a fourth-quarter write-down of $1.2 billion because of securities tied to subprime mortgages, causing the first quarterly loss in that firm’s 84-year history. And a Lehman Brothers analyst reported that Swiss banking giant UBS may have to take a write-down of as much as Sf8 billion ($7.11 billion), courtesy of its subprime woes. November 14 was also the day that Daniel Och, founder and CEO of New York–based Och-Ziff Capital Management Group, took his company public, raising $2.3 billion (about $1.2 billion of which came from Dubai International Capital, the investment arm of oilrich Dubai Holding). Och-Ziff joins Fortress Investment Group and Blackstone Group as the only publicly traded U.S.-based alternativeinvestment ﬁrms. Shares of Och-Ziff fell 6 percent from their $32 offering price on the first day of trading. Nonetheless, taking a hedge fund ﬁrm public in this difﬁcult market is an impressive accomplishment — and a lucrative one: About $1.1 billion of the proceeds from the IPO are going to Och, who says he will reinvest it in his firm’s funds, which as of September 30 had $30 billion in assets. Och-Ziff ’s investment record is solid. The ﬁrm’s ﬂagship fund has delivered an average annualized return of 16.6 percent since 1994, beating that of the Standard & Poor’s 500 index by 5 percentage points a year. One of the keys to the ﬁrm’s success was Och’s decision early on to expand beyond his equity roots into multiple strategies. Maverick Capital managing partner Lee Ainslie III has chosen a different path. Ainslie, who, like Och, has been managing a hedge fund since the mid-’90s, decided to focus exclusively on long-short equity. From 1995 to 2002, that decision paid off — the ﬁrm’s ﬂagship fund was up, on average, 21.4 percent a year. With $7.5 billion in assets at the end of 2001, Maverick was the third-biggest hedge fund ﬁrm in the world. But Ainslie stumbled badly in 2003, the ﬁrst of four years of mediocre performance. By the beginning of this year, Maverick, with $9.6 billion in assets, had fallen to No. 40 in the world. Yet as Staff Writer Imogen Rose-Smith reports in this month’s cover story, “Comeback Kid” (page 30), Ainslie’s brand of traditional long-short equity investing — Maverick’s main fund was up more than 20 percent through mid-October — may be the perfect tonic for today’s volatile times. MICHAEL PELTZ EXECUTIVE EDITOR mpeltz@iimagazine.com NOVEMBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 3

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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