Bloomberg Markets 50 Summit: Hedge Fund Panel Featuring Marcy Lasry, Glenn Dubin & Bruce Richards

We wanted to post up the video from one specific panel at the Bloomberg Markets 50 Summit in New York that featured Marcy Lasry of Avenue Capital, Glenn Dubin of Highbridge Capital, and Bruce Richards of Marathon Asset Management.

Their panel talked about hedge fund strategies and their various outlooks.  Bloomberg's Stephanie Ruhle moderated the discussion and here are some of the highlights.


Marc Lasry's Comments

Lasry noted how banks don't really have trading groups as much, so hedge funds aren't dealing with the banks as much and people "come to you" now and bypassing banks.  They've got one of the largest distressed funds in Europe and lots of banks have approached them about their portfolios.

Lasry argued that smaller hedge funds have to "be up double" what a big fund is to essentially justify all the risks an investor takes on investing in a smaller fund.

"At the end of the day, all you want to be focused on is the net (return).  The reason there's a discussion on a fees is people believe that net returns have come down, and that's because of the risk-free rate."


Glenn Dubin's Comments

Asked if he would started a hedge fund again today given regulatory requirements and the landscape, Dubin said setting up a hedge fund today is much more challenging than it once was. 

He echoed Lasry's comments that banks getting out of various business has led to new opportunities for many hedge funds. 

He also said there's no question the larger funds have a competitive advantage over smaller funds when it comes to accessing dealflow.  He also notes they have an advantage in hiring and the ability to retain top talent as it's a very competitive industry now.

"Fees are an odd issue in our industry."  He feels it's a binary outcome: either you decide to invest in a manager (and the market has set the fees), or you don't.  "To negotiate with a manager is a ridiculous discussion to have."

Dubin thinks the best opportunity now is to step in to provide capital where banks used to, but no longer can due to requirements.


Bruce Richards' Thoughts

Regarding hedge fund fees, he says large institutions want discounts available for big capital allocations to funds and Marathon reduces their fees for these big tickets or longer lock-ups.

"As a global institution, you search  the world for the best risk/reward to make absolute returns." 

Richards also recently spoke at the Alpha Hedge West conference and we've got coverage of his talk there via that link.

Embedded below is the video from the Bloomberg Markets 50 Summit:



For more coverage of the various conferences lately, head to:

- Notes from the Value Investing Congress (Ubben, Roepers, McGuire & more)

- Notes from the Alpha Hedge West Conference (Bass, Burbank, Richards & more)

Hedge Fund Panel: Is There Alpha In Asset Allocation? (Och, Mindich, Singh & More)

We're moving along in coverage of the hedge fund panels that recently took place. Yesterday there was coverage of key takeaways from the event and the "Case For Global Equities in 2010" from a panel of prominent long/short equity hedge fund managers. Additionally, there was a hedge fund manager panel on the global investment landscape in 2010.

Next up are the thoughts of Eton Park's Eric Mindich, Highbridge Capital's Glenn Dubin, Highfields Capital's Jonathon Jacobson, Och-Ziff Capital Management's Daniel Och, and TPG-Axon's Dinakar Singh from the panel on:

The Art of Multi-Disciplinary Investing: Is There Alpha In Asset Allocation?

Overall, the panelists thought that multi-strategy was the best fund format to take advantage of all the attractive opportunities. They debated as to whether there would be further consolidation in the hedge fund industry, but agreed that if regulation becomes too onerous that more funds will close and managers will run their own capital. Larger funds are more aptly suited to provide the increased transparency that investors are requiring now. There was a consensus that letting fund managers focus on investing rather than administration was essential and this favored larger funds.


Daniel Och (Och-Ziff Capital Management): Och's outlook focused on a bottom-up basis where he noted that this is an extremely attractive period overshadowed by macro risks. He notes that interest rates are likely to rise and that we should expect a similar experience as in 1993-1994 when we saw global quantitative easing (i.e. a bumpy ride of up's and down's but overall a good environment for investors).

On the topic of hedge funds, Och felt that an alignment of interests and incentives at a firm is crucial to success. He favors multi-strategy because it allows access to many more research and deal flow resources. One interesting note on firm culture is he wants an environment where people talk about how they can be better, not how good they are. Regarding hedge fund consolidation, he thinks it is talked about too frequently and that in 5 years time there will be ample smaller firms finding success. Och Ziff's master fund was up 23% for 2009 as noted in our hedge fund performance numbers post. Their Asia master fund was up 33.6%.


Eric Mindich (Eton Park Capital): Mindich's market outlook focused on the deleveraging that is taking place. He said that this creates opportunity on a micro basis even though there are headwinds and signaled that merger arbitrage will pick up. Mindich also noted that there has been a reduction in prop capital that has allowed Eton Park to capitalize on new opportunities as hedge funds provide this transitional capital now. Eton Park is a part of our custom Market Folly portfolio that is seeing over 25% annualized returns, created with Alphaclone. In our recent portfolio coverage of Mindich's firm, we noted that Eton Park expanded its UK holdings.


Dinakar Singh (TPG-Axon Capital): Singh's outlook focused on the fact that there is still policy risk, as well as funding and China risk. That said, he thinks that in the next 6-18 months that investors will underestimate the industrial improvements in America (TPG-Axon is currently finding many attractive opportunities there). He also noted that rates will go up over time and they will use credit to hedge equity. Lastly, the global world is more challenging than ever to invest in and that the alternative industry needs to be proactive in terms of regulation. They are not going to focus on every strategy, as they know when to say 'pass' on certain strategies.


Jonathon Jacobson (Highfields Capital): Jacobson reminded everyone of the old adage that investing is a marathon, not a sprint. The easy money has been made and markets are now more fairly priced. He thinks that the US is the most attractive geographic region and that the large cap, high quality names are the cheapest plays. This is sentiment we've seen out of many prominent hedge funds now. Bill Ackman & hedge fund Pershing Square recently started a large Kraft (KFT) position and is one of the many examples. The "high quality names are cheap" meme was echoed on the long/short equity panel we covered yesterday.

Highfields doesn't want to swing at every pitch, but rather just the big ones where they can hit home runs. They have 70 employees (25 investment professionals) and they like to keep the firm smaller. They note that the barriers to entry in the hedge fund industry are higher than in the past as investors want more transparency, counter-party management, and there will be a higher regulatory environment. This obviously favors larger funds that have the resources to let the investment team focus on the investments and the back office team focus on administrating.


Glenn Dubin (Highbridge Capital): Dubin's outlook centered on two major assumptions: that we will be in a churning economic environment for a while and that the last two years have been dominated by beta. He thinks 2010 will be more focused on alpha and that the amount of money allocated to event-driven strategies is the lowest he's seen in a while. Highbridge sees attractive returns there and also finds Asia very interesting. In terms of hedge fund culture, Highbridge says culture is critical and they spend a lot of time on interviews as they want team-players. Lastly, turning to the topic of investing in hedge funds, he said that allocators have to focus on the risk/reward of investing with experienced versus newer managers.

This wraps up the "Is There Alpha in Asset Allocation?" conversation. Head to the overview of the conference, the post on the long/short equity panel, as well as coverage on the global investment landscape in 2010. Check back tomorrow for summaries of the remaining hedge fund panels.