Next up in our series of notes from the Alpha Hedge West Conference is the State of the Hedge Fund Union with a talk featuring Jason Huemer (Visium), Bruce Richards (Marathon Asset), and Philip Weingord (Seer Capital).
Comments below: JH = Jason Huemer, BR = Bruce Richards, PW = Philip Weingord
State of the Hedge Fund Union
Investors as shock absorbers. Most investors want hurdle rate. Funds haven't had "rogue" trader issues. Big funds had inflows, small individual funds had outflows. Cult of personality.
BR> Only need to get past cult of personality if you want to grow after founder passes. Institutional key to growing. Marathon manages over $11B in AUM. Team of partners together over 18 years. All that history makes for a strong team with collective wisdom.
JH> Have tried to move from one star. Investors looking for and want something beyond "one" guy. Worked for Jamie Dimon and Steve Cohen. They have 50 risk takers. They have over $5B in AUM. No one controls P&L. 5 years ago known only as health care...had to move model to multi-strategy. It took 5 years of beating market by 1000 bps to convince people.
CH> Agrees with Joseph Brusuelas that we are in a structural break. Means old trends + stats not reliable.
PW> Fed tightening will equal outflows from bond funds...probably for 2 years. History says credit spreads normally come in during fed tightening. Oppys are floating rate...swap fixed rate for floating rate. Prefers stronger credit vs. High Yield Bonds.
JH> Has created alt mutual fund. Brick Lake was early proponent of Alt Mutual Funds. Log jam reason for delay. So many funds did not want to move down value map... other folks missing tools to move up. Sub-advisor in a couple mutual funds. Big funds saw move from fees to like 50 BPS from 110 BPS. Sees folks moving to multiple manager products and single manager products. In time, 25% of fees from mutual funds will be Alt Mutual Funds.
BR> How do liquidity needs of Alt Funds impact types of strategies? For example, can't offer liquidity in/out for say distressed debt funds. Excited about JOBS Act.
PW> Closed end funds can address some issues of liquidity caused by open end Alt Mutual Funds.
CH> Regulation?
PW> Hedge funds least to blame for financial crisis. If regulation increases confidence, then it is ok. Increases some cost and takes time. Form PF. Lots of it is silly questions, not know what is meant by some questions. Not al funds should have same questions. Overall, ok.
BR> Been registered with SEC over a decade now. Registered with numerous regulatory bodies. Would prefer to have one strong regulator. Look at JPM and recent announcement of hiring like 5,000 employees. If there were consolidated regulation, it could be better and more efficient.
JH> Regulators have been unfair to hedge funds with high profile and heavy handed tactics.
PW> Market not overreacting to speculation of Bernanke replacement.
BR> If Yellen gets job, she'll be more Bernanke than Bernanke.
Be sure to check out the rest of our summary of the Alpha Hedge West Conference.
