Institutional Investor's Alpha Magazine - November 2008 - (Page 16)

Both Ellerston and Everest seem to have been caught up in a backlash against publicly listed funds of any variety, particularly after woes encountered by a number of funds operating under the umbrellas of two huge investment companies, Sydneybased Macquarie Group and Babcock & Brown. “The listed vehicles have been found wanting and exposed to share activism,” says Daniel Liptak, a principal of Hatﬁeld Liptak Advisors, a Sydney-based investment research firm. “The model doesn’t work for them at the moment.” — Giles Parkinson SCOREBOARD Scoreboard Hedge fund returns by strategy, sorted by investment process, asset class and geographic focus, through September 30, 2008. September return Composite, equally weighted Composite, asset-weighted PROCESS GROUP YTD return –10.60% –8.82 –0.67 7.46 –9.72 –8.59 –9.97 –18.73 –10.20 –2.87 –7.54 –8.13 –15.82 –20.10 –6.37 –11.44 9.60 –8.40 –10.36 –7.23 –12.41 –12.85 –10.44 –14.29 –9.17 –1.48 0.59 –7.16 –8.62 –9.52 –10.39 –0.44 –21.55 –21.76 –17.33 3-month return –9.05% –8.95 –5.88 –3.94 –8.64 –7.72 –8.74 –17.12 –7.12 –1.26 –8.68 –5.93 –11.16 –13.07 –6.95 –9.90 –0.64 –7.33 –9.24 –6.10 –10.21 –10.79 –7.83 –10.37 –7.10 –5.62 –1.38 –7.34 –6.95 –8.71 –6.03 –5.70 –15.78 –11.77 –11.78 12-month return –9.60% –7.06 2.61 11.69 –7.46 –7.90 –8.83 –18.43 –9.34 –4.24 –7.87 –5.41 –15.23 –19.95 –5.20 –9.88 16.00 –8.01 –9.18 –8.06 –12.52 –12.59 –11.53 –13.84 –8.89 1.62 1.57 –6.39 –9.09 –9.10 –12.48 2.51 –18.59 –22.22 –16.54 –5.56% –5.23 –1.80 0.47 –4.37 –5.87 –7.23 –12.97 –6.38 –3.54 –4.69 –3.04 –7.02 –8.43 –4.07 –6.18 2.57 –5.02 –5.43 –4.97 –7.49 –7.6 –7.04 –6.55 –5.77 –2.59 0.16 –4.97 –5.61 –6.51 –3.04 –2.66 –8.19 –6.52 –6.37 Directional trading Systematic trading Discretionary trading Relative value Arbitrage Convertible arbitrage Fixed-income 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 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 Texas oilman Lee Bass pledged $20 million to Yale University in 1995, he envisioned its being spent to create an intensive academic program devoted to Western civilization. But Yale returned the money because administrators had not anticipated that Bass would insist on having the say-so over which professors would take part. Not acceptable, Yale brass ruled. One would be hard-pressed to ﬁnd many other instances of colleges refusing such generosity — Yale is in a position to do so because it is so vastly endowed already. Many schools are more than willing to take big donations that come with strings attached. In fact, another Texas billionaire, T. Boone Pickens Jr., donated $165 million to his alma mater, Oklahoma State University, two years ago with the understanding that his hedge fund, BP Capital Management, would manage the money. Pickens donated the money to the university’s $168 million Cowboy Athletics endowment, and it was earmarked for finishing the OSU football stadium and building a residential village for athletes. It is the most prominent example of a donation structured to take advantage of a recently enacted IRS rule that lets people to donate money to institutions and then manage it. “Since it’s his money, the risk is only to him as the donor and to the athletic department as the beneficiary,” says Kirk Jewell, who, as president and CEO, manages the $448 million OSU Foundation, the university’s much bigger academic endowment, which, Jewell adds, is more conservative than Cowboy Athletics and has guidelines that preclude donors from managing their own contributions. Pickens seems to have concluded that such restrictions make sense. In October, he announced he was turning what was left of the original $165 million over to university endowment T. Boone Pickens Jr. managers. Neither the donor nor the beneﬁciary would state exactly how much that was, but a good portion of the original gift was lost in BP Capital, which has tanked this year. Pickens is more than making up for it; he said he would give an additional $63 million and that OSU was getting a total of $188 million from him. These ﬁgures provide a big clue to how much went down the tubes. Foundation assets have declined by 17 percent since September, and Jewell says he has put aside $50 million in cash to be used to take advantage of near-term market bargains. Time, it seems, is one advantage that academic endowments have over athletic ones. “We monitor things closely, with a ten-to-12-year horizon, and make a point of not getting terribly excited or depressed,” Jewell explains. “We have every style possible, from long-only to timber to, yes, hedge funds.” It’s unlikely that alternative investments will fall out of favor anytime soon at OSU, or, for that matter, at most universities. “The management trend at college endowments has been a move toward what they hope are higher returns,” says Brian Flahaven, a university-endowment expert at the Washington-based Council for Advancement and Support of Education. “They’re looking to diversify.” — J.A. Correction In the fourth annual Alpha Awards™, published in the October issue, a ranking of the hedge fund industry’s favorite service providers omitted part of ALPS Price Meadows’s name. 16 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2008 ©OKLAHOMA STATE UNIVERSITY Give, Take, Give More W

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

Institutional Investor's Alpha Magazine - November 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Risk Rewarded The Good Guys: In the Here and Now Interview: Minister of Finance Cover Story: The Agony of Dan Zwirn Strategies: The Early Birds Are Awake Strategies: The Call of Shari’a Profile: Sweet Home Chicago Research Center: What Stampede? Alpha Bytes: Centralize the Data Unhedged: Commentary: Learning from the Wreckage

Institutional Investor's Alpha Magazine - November 2008

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