Sponsored by: Societe Generale, Citco Fund Services, Dechert, Lyxor Asset Management, KPMG Ireland and RFA Congratulations to EuroHedge on your fi rst 20 years We’re with you for the long term 2018 Citco Treasury manage all cash movements 2018 2017 and balances in one location CitcoConnect Citco Waterfall data room and online carried interest computation subscription for investors 2016 CitcoOne game-changing real-time Our advanced solutions, reporting cutting-edge technology and steadfast commitment to take service to the next level ensures we remain the 2009 Æxeo Investor (AXI) leading administrator in the integrated allocation, fee calculation alternative assets industry and investor reporting 2002 Æxeo straight-through processing and real-time data Eurohedge 20 advertisement Dec 2018 v9.indd 1 19/12/2018 09:04 03 INTRODUCTION From humble beginnings to institutional industry When the first issue of EuroHedge was published in January 1999, the small handful of European hedge funds in existence managed $15bn YEARS OF between them. To call it an industry would have been an exaggeration. In trading terms, the magazine’s launch was a long bet on the prospects of a tiny corner of asset management which used sophisticated investing techniques to post high returns. Having noticed the growth in American hedge funds, the founders of this magazine believed it might just catch on in Europe. It proved a worthwhile trade. From a humble start, Europe’s community of hedge funds has grown into an industry managing more than half a trillion dollars in offshore funds, and plenty more in Ucits Main sponsors and other product types besides. Fortunes have been made, big bets won and lost, and countless headlines printed as hedge funds became a powerful force in financial markets. It has become an institutionalised industry. After initially focusing on wealthy individuals and family offices, funds now draw most of their capital from retirement and sovereign wealth funds, insurers and other institutions. The shift accelerated after 2008 as the operational spotlight intensified and the influence of funds of hedge funds waned. Firms such as Marshall Wace, Man Group and CQS now manage billions for pensioners around the world. This special edition of EuroHedge does not merely commemorate our twentieth anniversary, proud as we are at reaching the landmark. We have spoken to some of Europe’s leading names to take stock of the industry’s progress so far, explore its present and, most importantly, analyse what the future holds. The first chapter contains interviews with most of the industry’s leading names who were in business in 1999, our first year. As research on page 34 by HFM Insights reveals, 10 firms with current assets of more than $3bn have been trading since then – representing the pioneers of the industry. We have also spoken to several managers who started subsequently, including Leda Braga and Alan Howard, who have made a similarly considerable impact. Associate sponsors We provide an industry chronicle in the second chapter, highlighting the key moments from the past 20 years. EuroHedge has been there every step of the way, recording the ups and downs in print and online, and bringing the industry together at its events every year, as my colleague Nick Evans documents. We also look back in detail at the cataclysmic events of 2008. The third chapter is given over to investors, the bedrock of the industry, and the impact of the march of institutions. In the fourth chapter we explore the operational changes that have defined the past 20 years and technical challenges that continue to set the agenda. EDITOR Will Wainewright +44 (0)207 832 6610 [email protected] // Thank you to all our interviewees for their involvement and to our ASSISTANT EDITOR Hugh Leask [email protected] // EDITOR EMERITUS sponsors for their support. Most importantly, thanks to you, our readers, Nick Evans [email protected] // DATA AND RESEARCH MANAGER for supporting the magazine, attending our events and enabling the Siobhán Hallissey [email protected] +44 (0)207 832 6677 // EUROPEAN growth of this dynamic industry. RESEARCH MANAGER Amy Wilcockson [email protected] // If the last 20 years are anything to go by, the next PRODUCTION EDITOR Michael Hunt // ART DIRECTOR Jack Dougherty // ADVERTISING AND SPONSORSHIP James Barfield +1 (646) 931 9058 20 will be quite a ride. [email protected] // SUBSCRIPTION AND DATA SALES UK +44 (0)207 832 6511 Enjoy the issue. [email protected] ASIA & US Joel Dudden +44 (0)207 832 6691 joel.dudden@hfm. global REPRINTS +44 (0)207 832 6511 // CHIEF EXECUTIVE Charlie Kerr // ISSN Will Wainewright 1473-3153 // PUBLISHED BY Pageant Media, One London Wall, London, EC2Y 5BD, UK // PRINTED BY The Manson Group // © 2018 all rights reserved. No part of this publication may be reproduced without written permission of the publishers. No [email protected] statement in this magazine is to be construed as an invitation to invest in hedge funds. EUROHEDGE 1999-2019 03 04 CONTENTS BLAZING A TRAIL The pioneers who shaped an industry SIR PAUL MARSHALL AND IAN WACE LEDA BRAGA SIR PAUL RUDDOCK 06 MARSHALL WACE – Class of 1997 INDUSTRY 08 LANSDOWNE PARTNERS – Class of 1998 10 SYSTEMATICA INVESTMENTS – Class of 2015 ALAN HOWARD CHRONICLE 12 MAN GROUP – Class of 1989 Key moments from the past 20 years 14 ASPECT CAPITAL – Class of 1998 16 CQS – Class of 1999 26 1999 – The first year of EuroHedge 18 BRUMMER & PARTNERS – Class of 1996 28 TIMELINE – European hedge industry over 20 years 20 CHEYNE CAPITAL – Class of 2000 30 COMMENT – Nick Evans reflects on the last two decades 21 BREVAN HOWARD – Class of 2002 32 LOOKING BACK TO 2008 – Memories of the crisis 23 TRANSTREND – Class of 1991 34 INDUSTRY GROWTH – Europe’s largest brands 24 INFORMED PORTFOLIO MANAGEMENT – Class of 1998 36 EUROHEDGE EVENTS – The Awards and Summit SIR MICHAEL HINTZE PATRIK BRUMMER KEVIN GUNDLE LUKE ELLIS INVESTOR VIEW March of the institutions 40 INVESTOR TRENDS – The modus operandi of allocators ANTHONY TODD JONATHAN LOURIE AND STUART FIERTZ 44 ALBOURNE PARTNERS – Consultants for change 46 LYXOR – Rising hedge fund interest as bull market slows TECHNOLOGY AND OPERATIONS A new industry 48 HFM INSIGHTS RESEARCH – Hedge fund operations 52 INDUSTRIAL EVOLUTION – Changing role of the COO 55 SOCIETE GENERALE – Prime brokers eye closer relations 56 DECHERT – Industry changes – the legal perspective 57 CITCO – Trends driving fund administration 58 RFA & KPMG – Operations: past, present and future LARS ERICSSON HAROLD DE BOER CLAUDIA STANGHELLINI YEARS OF BLAZING A TRAIL The pioneers who shaped an industry 06 CLASS OF 1997 MARSHALL WACE Seeds of success for YEARS OF Marshall Wace sown Class of 1997 in dark days of 2008 BY WILL WAINEWRIGHT Sir Paul Marshall and Ian Wace on how crisis and chemistry have shaped their $39bn firm aul Marshall suspected it our business would be exposed to un- subsequent growth. was important when Ian expected events,” says Wace. “It taught The young intern joined the firm P Wace invited him to lunch us to always have a risk parameter that permanently. “Clake is the sum total of in January 1996. He did was pretty trimmed.” his natural brilliance and what he has not remember Wace – who had been Eureka became one of the first Euro- learned here. He must be one of the the first broker to call him when he pean funds to reach $1bn in 1999 and most influential people within finance,” started at Mercury Asset Management limited its size at $1.4bn two years later. says Wace. “I am proud to have had 11 years before – as a serial luncher. Work then started on a proprietary sys- someone as rounded and phenome- The pair met at Leadenhall Market. tem to measure the value of ideas re- nally capable as that join as a graduate “Ian shared his idea about starting a ceived from the sell-side. Wace enlisted trainee, and then go on to have the ca- hedge fund business and, as it hap- Anthony Clake, an undergraduate who reer he has had with us. But he is one of pened, I had been thinking of doing the had been recommended for an intern- many examples at the firm.” same thing,” says Marshall. “It was very ship, to help. The pair say it helps being a partner- serendipitous.” You needed $50m to start ship, rather than the firm having a sin- “He was my fifth call, but there you gle leader. “Some hedge funds are led go,” jokes Wace during a rare joint inter- and I couldn’t for the life of by one person who is not challenged, view at the $39bn firm’s London head- me see where we were going and who ends up falling in love with quarters, given to mark EuroHedge’s their own genius and reputation, before twentieth anniversary. Marshall Wace’s to get it from. blowing up,” says Marshall. The balance position 23 years after that lunch as one brought by the partnership is perhaps SIR PAUL MARSHALL of the world’s largest long/short equity shown by their positions in the Brexit firms would have been hard to foresee “I told Anthony I wanted to measure referendum in 2016, with Wace favour- in the early days, when they struggled the value of all the ‘inputs’ – analyst ing continued EU membership and Mar- to raise more than $1m apiece from pro- notes etc – that came in to us. By the end shall backing the campaign to leave. spective investors. of summer 2001 we had the basis of an “Ian and I are constantly challenging “You needed $50m to start and I application that captured the breadth and criticising each other.