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Hedgeweek Awards 2011

Hedgeweek Awards 2011

March 2011 Hedgeweek Awards 2011

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In this issue… 03 Hedgeweek Awards 2011 28 India Capital Management results Best Fund 04 Milestones on the road to 29 JP recovery Best Offshore Fund Administrator By Simon Gray 31 Linedata 05 Agecroft Partners Best Fund and Reporting System Best Third-Party Marketing Firm 32 Lyxor Management 06 Alceda Fund Management Best Managed Account Platform Best Ucits platform 33 Ogier 09 Alcentra Best Offshore Law Firm Best Manager 36 Peregrine Communications 12 Audley Capital Best European PR Firm Best Event-Driven Manager 37 Prime Fund Solutions 13 Capital Support Best European Fund Administrator Best Managed Account Platform Technology 38 Capital returns as 15 Learning to live with the AIFMD regain confidence By Simon Gray By Simon Gray 16 Custom House Group 40 PVE Capital Best Asian Administrator Best Multi-Strategy Manager 17 Dalton Strategic Partnership 42 Sabre Fund Management Best Equity Manager Best Fund 21 Deutsche 43 Sidley Austin Best Ucits-Compliant Product Best North American Law Firm 24 IMQubator 45 Simmons & Simmons Best Seeding Platform Best European Law Firm 25 IMS Group 46 Venus Capital Best North American Regulatory Adviser & Best Relative Value Manager Best European Regulatory Adviser

Publisher

Special Reports Editor: Simon Gray, [email protected] Sales Managers: Simon Broch, [email protected]; Malcolm Dunn, [email protected] Publisher & Editorial Director: Sunil Gopalan, [email protected] Graphic Design: Siobhan Brownlow, [email protected] Photographs: Kate Stanworth Published by: GFM Ltd, 1st Floor, Liberation Station, St Helier, JE2 3AS, Channel Islands Tel: +44 (0)1534 719780 Website: www.globalfundmedia.com AWARDS 2011 ©Copyright 2011 GFM Ltd. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 2 R e s u lt s

AWARDS 2011 The winners

The Hedgeweek Awards for excellence among hedge fund managers and service providers have recognised the increased focus on transparency, consistency and depth of expertise in the new climate. The awards, presented on 3rd March by actress Cherie Lunghi at a lunch in Mayfair, were decided by the votes of Hedgeweek’s nearly 41,000 subscribers, who include individual and institutional investors as well as managers and other industry professionals at firms including fund administrators, prime , custodians and advisers. The 2011 Hedgeweek Awards reflect the industry’s recovery from its difficulties in 2008 and early 2009 as stability in performance has returned and capital inflows l Best Absolute Return Manager: have helped under management to recover the India Capital Management record levels seen nearly three years ago. l Best Offshore Law Firm: Ogier The winners of the Hedgeweek Awards 2011 are: l Best Managed Account Platform Technology: l Best Multi-Strategy Manager: PVE Capital Capital Support l Best Event-Driven Manager: l Best North American Regulatory Advisory Firm: Audley Capital Advisors IMS l Best Distressed Securities Manager: Alcentra l Best European Regulatory Advisory Firm: IMS l Best European Accounting Firm: Ernst & Young l Best Asian Prime : l Best Ucits Platform: Alceda Fund Management Global Prime Finance l Best European Hedge Fund Administrator: l Best Manager: Finles Prime Fund Solutions l Best Specialist Fund of Hedge Funds Manager: l Best Fixed-Income Manager: Pluscios Management Danske Invest Hedge Strategies l Best Third-Party Marketing Firm: l Best North American Hedge Fund Administrator: Agecroft Partners GlobeOp l Best European Public Relations Firm: l Best European Law Firm: Simmons & Simmons Peregrine Communications l Best Long/Short Equity Manager: l Best Relative Value Manager: Dalton Strategic Partnership Venus Capital Management l Best Ucits-Compliant Product: Deutsche Bank l Best European Prime Broker: Newedge Group l Best and Reporting Systems: l Best Managed Accounts Platform: Linedata Lyxor l Best Offshore Advisory Firm: Carne Group l Best Management Software: PerTrac l Best Seeding Platform: IMQubator l Best North American Law Firm: Sidley Austin l Best Asian Hedge Fund Administrator: l Best North American Accounting Firm: Custom House Global Fund Services Anchin, Block & Anchin l Best Managed Futures CTA: l Best North American Prime Broker: Capricorn Asset Management l Best Diversified Fund of Hedge Funds Manager: l Best North American Public Relations Firm: Asset Management MacmillanCommunications l Best Convertible Manager: l Best Credit Manager: MKP Capital Management Lazard Asset Management l Best Market Neutral Manager: These awards are given by GFM Ltd and do not certify any statutory compliance in any jurisdiction nor offer any assurance about the future Sabre Fund Management performance of any company, product or service. The awards are based on the votes of Hedgeweek readers according to a range of their own criteria including l Best Offshore Hedge Fund Administrator: product design and innovation, skills and experience, and quality of client JP Fund Administration service. Past investment performance is no guarantee of future results.

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Milestones on the road to recovery By Simon Gray

The second edition of the Hedgeweek the slump in confidence it suffered in 2008 Awards for excellence among hedge fund and early 2009. The renewed stability of managers and service providers comes performance has been rewarded by capital at a time when the outlook is starting to inflows, especially from institutional investors, look brighter for the hedge fund industry that in turn have helped assets under following the difficulties of the past few management to return to the record levels years. Performance in 2010 was in most seen nearly three years ago. cases unspectacular but solid, delivering on Last year hedge funds returned just over the industry’s promise to provide consistent 10 per cent, according to most established returns and protect capital whatever the state industry providers, after the roller- of traditional asset markets, and it appears coaster ride in which the sector lost roughly that this pattern is continuing into the early 20 per cent in 2008, then gained a similar months of 2011. amount the following year. Their 2010 The results of this year’s Hedgeweek performance also enabled many managers Awards are conditioned by the increased who had not done so before to resume focus on transparency, consistency and earning performance fees, an important step depth of expertise in the new investment in restoring stability to their . climate, but also the industry’s recovery from The return to ‘normal’ levels of 7

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 4 AG E CR O F T Par t n e rs Agecroft Partners Best Third-Party Marketing Firm

Agecroft Partners specialises in consulting credibility of the managers it represents – and third-party marketing for hedge funds. investors know that only very high-quality Its objective is to raise assets globally for funds are represented. “Our research process institutional quality hedge fund managers by involves screening 2,000 managers each utilising a consultative approach within the year,” Steinbrugge says. “Usually we add institutional community. about two new managers a year, and we are The firm was founded by Don currently actively looking to replace one of our Steinbrugge, who has 26 years of experience managers who recently reached capacity.” in the institutional Typically, Agecroft represents large, well- industry. The five senior professionals established hedge funds with strong track at the firm pride themselves on having Don Steinbrugge, founder, records and investment teams, although they strong investment and industry knowledge, Agecroft Partners will represent a few emerging managers. giving them significant credibility with large Says Steinbrugge: “Currently we represent institutional investors. The partners average six hedge funds with an average size of over 16 years of industry experience, and USD2bn in , one four of the five partners have previously is located in Hong Kong, two in London worked for multi-billion-dollar alternative and three in the US. All of the strategies are investment firms. complementary.” Agecroft is highly selective of the firms Each client receives tailor-made marketing it represents. As a result it utilises an to help its business grow effectively. “We try institutional-quality due diligence process in to be more than just your typical hedge fund manager selection. This begins by leveraging sales organisation,” Steinbrugge says. “With its industry-leading reputation to attract our managers we’re continuously providing high-calibre managers requiring marketing feedback to managers following support. The firm’s approach to selecting any meetings with potential investors and managers from a universe of thousands identifying follow-up plans for each prospect. involves a four-stage process, namely direct For investors we use a consultative approach contact from hedge fund managers; hedge where we not only keep them updated fund referrals from institutional hedge fund on the managers we represent, but also investors and service providers; industry our industry knowledge to help them research; and screening hedge fund manage their portfolios more effectively.” databases. Steinbrugge says that most net inflows The principal aim of Agecroft, following into alternatives over the last two years the screening process, is to raise assets have come from large funds. for its managers, either on a global basis or “We expect them to continue to be large with coverage tailored to enhance a hedge investors,” he says. “However, we also fund’s existing marketing strategy, focusing expect endowments, large family offices on a particular geographic region or investor and funds of funds to significantly increase market segment. The senior partners their allocations in 2011 as well. This should typically are in touch with more than 1,000 benefit small and mid-sized hedge funds.” investors a month and hold direct meetings Of winning the award, Steinbrugge says: with between 50 and 100. “We’re always focused on making sure we The fact that its screening process is have a very strong brand. Obviously we’re so rigorous has helped foster Agecroft’s very honoured to have won this award and reputation and enabled it to stand out from what we’re most proud of is that many of the competition, and also enhances the your readers are based in Europe.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 5 A l c e d a F u n d M a n a g e m e n t Alceda Fund Management Best Ucits platform Alceda Fund Management is an marketing and distribution services. independent service provider 100 per Alceda chief executive Michael cent owned by Aquila Group based in Sanders says the main reason for Hamburg, Germany. Launched in 2007, establishing AUP was due to two -based Alceda has been emerging trends. “First, investors in one of the fastest growing structuring offshore funds were getting worried specialists in Europe, with current post-Madoff, so there was a big assets under administration of over trend of offshore managers moving USD4.5bn. It is one of Europe’s leading onshore. Secondly, we see a trend in independent structuring specialists Luxembourg becoming a global hub dedicated to providing institutional for fund distribution.” investors, fund managers, and family Hamid Parsa (left), director of Hamid Parsa, Alceda’s director of sales/ sales/business development, offices with tailored investment solutions. business development, adds that one of the and Michael Sanders, chief The Alceda UCITS Platform (AUP), which executive, Alceda Fund key differentiators of the platform compared was designed in-house, provides its clients Management with its competitors is its base of almost 50 with the freedom to choose their own professionals, although he admits that the service providers from prime brokers to bigger banking platforms made conditions custodians and partners. This gives quite tough last year. fund managers a cost-efficient and tailor- He says: “Our strategy mainly focuses made solution, with Alceda’s team of almost on managers with USD20m to USD200m 50 specialists able to bring a Ucits fund to in assets under management, although we market in four to six weeks. would be more than happy to launch high- Alceda’s is the second largest Ucits profile managers on the platform as well.” platform in Europe supporting the ever- Two or three new funds are due to launch growing Newcits universe. In addition to by the end of the first quarter. guidance on every step of the process from Sanders confirms that Alceda has been in legal and execution to , talks with various private label companies in each fund launched with AUP is given its the US and that Asia will be a “big focus”. The own professional reporting system. firm is already active in the region, co-operating The firm uses a three-step approach in with the Luxembourg Fund Industry the fund set-up process, be it an alternative Association, Alfi, in running Ucits seminars. investment vehicle, an absolute return fund “We’re getting calls regularly from Asian as well or a long-only fund. Its specialists start by as US fund managers,” Parsa says. checking a strategy’s feasibility, advising Since 2007, more than 100 investment the investment manager on the best vehicle solutions have been successfully implemented. for that strategy and if necessary creating a Fund managers that choose the AUP are tailor-made wrapper. free to focus on what they do best – portfolio Once the appropriate structure has been management – while having the freedom of chosen, Alceda takes care of all the details cross-border distribution throughout the EU. involved in launching a Ucits III-compliant fund, On winning the award, Parsa says: including initial preparation and submission “As a medium-sized company, it’s a great of relevant documents to the CSSF, the achievement for us,” while Sanders adds: “This Luxembourg regulator, and the establishment award underscores how important platform of trading and risk management procedures, independence is to fund managers.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 6 O v e r v iew

4 performance has encouraged investors to bring their capital back to hedge funds after the upsets of 2008-09. Following that period of substantial outflows – accompanied by sudden illiquidity of assets that forced many managers to restrict redemptions through gates and suspensions – institutions in particular have renewed their faith in hedge funds, particularly as other types of investment have disappointed or delivered particularly volatile returns. In the final quarter of last year total industry assets under management grew by nearly USD150bn to end the year at USD1.92trn, according to HFR. Barring an unexpected upset, assets are poised to overtake the previous peak recorded by HFR, Hamid Parsa, director of investment banks to hive off in-house sales/business development of USD1.93trn at the end of June 2008, if at Alceda Fund Management, into they have no already done so. Assets have receives the award for Best independent units. grown by 44 per cent since their nadir just Ucits Platform from Cherie The industry ranks have also been Lunghi over two years ago, and with large volumes swelled by talented managers striking out of institutional capital still waiting on the on their own, in some cases because sidelines, the potential for growth over the of difficulties at existing hedge fund next few years remains substantial. management businesses that have found There is always room for quibbling it harder to recover, especially in business about the precise level of hedge fund terms, from the travails of 2007-08. And assets – in particular, surveys of hedge fund investors may be wary now, but most will administrators rather than managers tend have in mind a series of studies suggesting to come up with significantly higher totals that new managers deliver on average – but the trend is inescapable. significantly better returns than their longer- According to HFR, investors committed established counterparts managing much USD13.1bn in net new capital in the final higher levels of assets. quarter of 2010, bringing the annual total to Meanwhile, the supporting infrastructure USD55bn – the largest figure since 2007. for hedge fund managers is seeing The news is not so good for everyone. changes of its own. In part that’s down to Anecdotal evidence from industry members consolidation, especially among alternative around the world suggests that much of fund administrators, although there is a the money flowing back into the industry is parallel trend toward the emergence of niche going to established managers and funds. players expanding from offshore jurisdictions Start-up businesses are taking longer to into new markets. raise capital and to launch their funds, and The cards have also been shuffled by the squeeze can be tough at a time when broader upheavals in the financial industry, compliance and regulatory costs have risen. most notably the collapse of one of the The golden age for new managers in the leading players, Lehman mid-2000s now seems a distant memory. Brothers, but also the disappearance of one Still, there are factors that suggest that of the top names in fund administration, for all the difficulties, the industry is in line Fortis. More turbulence may be in store as to experience an injection of new talent. depositary banks digest the implications of The introduction in the US as part of the new European rules prompted by the role of Dodd-Frank Act provisions of the Volker rule, feeder funds, and the supposed failings of requiring a separation of publicly-guaranteed their custodians, in investor losses resulting traditional banking business from proprietary from the Bernard Madoff scandal. trading and other activities deemed to In the first quarter of 2011 the industry has be particularly risky, has prompted many demonstrably changed considerably since 11

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 7 Reach new heights.

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This advertisement is a fi nancial promotion and is not intended as investment advice. The information provided within is for use by professional investors only and should not be relied upon by retail investors. The information provided may not be used for the purpose of an offer or solicitation in any jurisdiction or in any circumstances in which such offer or solicitation is unlawful or not authorised. The value of and the income from them is not guaranteed and can fall as well as rise due to market and movements. When the investment is sold the amount received could be less than that originally invested. Our investment products are not insured by the FDIC (or any other state or federal agency) and are not guaranteed by any bank. BNY Mellon Asset Management offers a diverse array of investment strategies and products, some with special and limitations. Past performance is not a guide to future performance. To help us continually improve our service and in the interest of , we may monitor and/or record your telephone calls with us. Issued by BNY Mellon Asset Management International Limited, BNY Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered in England No. 1118580. Authorised and regulated by the Financial Services Authority. BNY Mellon Asset Management International Limited and Alcentra are ultimately owned by The Bank of New York Mellon Corporation. The Bank of New York Mellon Corporation holds 94% of the parent of Alcentra group. The Alcentra Group refers to these affi liated companies: Alcentra Ltd. and Alcentra NY, LLC. Only Alcentra NY, LLC offers services in the U.S. CP 6380-24-02-2011.

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Alcentra focuses its investment strategies on all distressed, high yield debt and equity sub-investment grade debt capital markets of investments on behalf of its institutional and Europe and North America. It includes both private fund clients seeking exposure to Alcentra Ltd, operating out of London, and special situations. Alcentra NY, LLC operating out of New York The Alcentra Special Situations team City; only Alcentra NY offers services in the US. aims to generate strong returns by investing Established in March 2002, Alcentra directly or indirectly in distressed debt became a subsidiary of BNY Mellon in opportunities across the of 2006. Alcentra Ltd and Alcentra NY, are companies in Europe and North America. subsidiaries of BNY Alcentra Group Holdings, Client portfolios may vary but typically Inc. As of December 31, 2010, Bank of New Damien Miller, global head of comprise a mixture of loans, equity and both York Mellon Corporation owned 94 per cent special situations, Alcentra secured and unsecured bonds. Fundamental of BNY Alcentra Group Holdings and the views are expressed by being long or short management and employees of Alcentra in these . The strategy does owned the remaining six per cent. not apply external . Currently managing approximately Strategically, Miller places greater USD16.4bn of assets through approximately emphasis on debt, allocating between 43 private funds and managed accounts, five classes of distressed investment: Alcentra’s team of 57 investment fundamental value, control investments, professionals operates out of London private/illiquid investments, event-driven and New York. Alcentra’s overarching investments and capital structure arbitrage. is twofold, combining In addition to the dedicated resources of extensive fundamental research and credit his team, Miller can call upon Alcentra’s 22 analysis with active portfolio management sector specialist analysts when managing to determine the best credit instruments in the portfolio as well as senior leaders at which to invest on behalf of its private fund Alcentra, which brings an average of over 11 and institutional clients. years’ distressed experience to the table. London-based Damien Miller, who According to Miller, the range of market joined Alcentra in July 2007, is global head opportunities last year was fairly broad. “A large of special situations. With a team of five amount of liquidity in the system opened up the investment professionals in London and capital markets, and we saw the market New York, Miller assumes full responsibility resurrect itself in Lazarus-like proportions,” for portfolio management and trading of he says, adding that a decent portion of performance was based on leveraged positions in the event-driven space. “We believe we’re going to be in for a long cycle of deleveraging following the bursting of the credit bubble. What makes this cycle so exciting is that large-scale government intervention, in our opinion, is distorting the deleveraging effort, so we expect to see periods of . That should create opportunities for us to purchase assets in the stressed and Damien Miller receives the distressed space.” Europe will be an area of award for Best Distressed key focus for the Alcentra Special Situations Securities Manager from Cherie Lunghi team, according to Miller, because its multi-

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 9 A l c e n t ra

jurisdictional nature adds to the potential for If this document is used or distributed in assets to be mispriced. Germany, it is issued by WestLB Mellon Asset Before joining the firm, Miller was based Management Kapitalanlagegesellschaft mbH, in New York where he worked as a director, which is regulated by the Bundesanstalt and for für Finanzdienstleistungsaufsicht. WestLB Capital’s special situations group between Mellon Asset Management was formed as 2002 and 2006, managing a proprietary fund a 50:50 joint venture between The Bank of that at its peak reached USD1bn. n New York Mellon Corporation and WestLB AG. If WestLB Mellon Asset Management Disclaimer Kapitalanlagegesellschaft (WMAM KAG) This is a financial promotion and is not receives any rebates on the management intended as investment advice. The fee of investment funds or other assets, information provided within is for use by WMAM KAG undertakes to fully remit such professional investors and/or distributors and payment to the investor, or the Fund, as should not be relied upon by retail investors. the case may be. If WMAM KAG performs All information relating to Alcentra has been services for an investment product of a third prepared by Alcentra Limited for presentation party, WMAM KAG will be compensated by by BNY Mellon Asset Management the relevant company. Typical services are International Limited (BNYMAMI). Any views investment management or sales activities for and opinions contained in this document funds established by a different investment are those of Alcentra at the time of going to management company. Normally, such print and are not intended to be construed as compensation is calculated as a percentage investment advice. BNYMAMI and its affiliates of the of the respective fund, are not responsible for any subsequent calculated on the basis of such product’s fund investment advice given based on the volume managed or distributed by WMAM information supplied. KAG. The amount of the management fee is This document may not be used for the published in the of the respective purpose of an offer or solicitation in any fund. Any compensation paid to the WMAM jurisdiction or in any circumstances in which KAG does not increase the management fee such offer or solicitation is unlawful or not of the relevant fund. A direct charge to the authorised. investor is prohibited. The information given Past performance is not a guide to future herein constitutes information within the performance. The value of investments and meaning of §31 sub-section 2 WpHG (German the income from them is not guaranteed and Securities Trading Act). In Singapore, this can fall as well as rise due to document is issued by The Bank of New York and currency movements. When you sell Mellon, Singapore Branch for presentation your investment you may get back less than to professional investors. The Bank of New you originally invested. York Mellon, Singapore Branch, One Temasek No warranty is given as to the accuracy Avenue, #02-01 Millenia Tower, Singapore or completeness of this information and no 039192. Regulated by the Monetary Authority liability is accepted for errors or omissions in of Singapore. In Dubai, United Arab Emirates, such information. This document should not be this document is issued by the Dubai published in hard copy, electronic form, via the branch of The Bank of New York Mellon, web or in any other medium accessible to the which is regulated by the Dubai Financial public, unless authorised by BNY Mellon Asset Services Authority. If this document is used Management International Limited to do so. or distributed in Hong Kong, it is issued by This document is issued in the UK and BNY Mellon Asset Management Hong Kong in mainland Europe (excluding Germany) by Limited, whose business address is Level 14, BNY Mellon Asset Management International Three Pacific Place, 1 Queen’s Road East, Limited. BNY Mellon Asset Management Hong Kong. BNY Mellon Asset Management International Limited, 160 Queen Victoria Hong Kong Limited is regulated by the Hong Street, London EC4V 4LA. Registered Kong Securities and Futures Commission and in England No. 1118580. Authorised and its registered office is at 6th floor, Alexandra regulated by the Financial Services Authority. House, 18 Chater Road, Central, Hong Kong.

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7 the heady days of 2006 and early 2007. Even the newest managers today are being asked to show proof of institutional processes and operations before investors outside the ranks of friends and family will commit money. Topics such as risk management, transparency and reporting are on everyone’s lips; due diligence is the watchword for investing institutions, and these days the diligence is rather more evident than a few years ago. Service providers too are under the microscope. The pressure is not coming from investors alone. Over the past two years the regulatory landscape has changed dramatically round the world, starting in the US, where the Dodd-Frank Act is now set to bring most Michael Treichl, co-founder of wondering out loud whether they might Audley Capital, receives the managers under the supervision of the award for Best Event-Driven attract managers of funds that are not Securities and Exchange Commission. Nearly Manager from Cherie Lunghi targeted at European investors and are five years after the SEC’s first attempt to neither domiciled nor serviced within the EU. regulate hedge fund investment advisers was Still, it could have been a lot worse. struck down by the courts at the behest of For the fact that it is not, thanks are due Philip Goldstein, the argument is no longer to the concerted campaign by industry whether managers should be regulated organisations and individuals who worked but how. tirelessly to educate European lawmakers In Europe, members of the industry may about the facts, as opposed to the myths, well feel they have dodged a bullet after about the alternative fund industry and seemingly seeing off draconian proposals ensured that some of the most unworkable to inflict a one-size-fits-all straitjacket on the and damaging provisions were removed or alternative investment industry as a whole. watered down. Last November European Union member The final outcome of the European states and the European Parliament agreed certainly benefited one part of the industry on a compromise to end more than a year that had much to lose, the and a half of deadlock over the Alternative industry and financial centres stretching from Managers Directive, whose the to the . first draft was rushed out in April 2009 at The obituary of the offshore world has been the height of the global moral panic over written many times, especially in the past stability. three years, but it has survived the onslaught At some points in the interminable by its willingness to co-operate on tax issues legislative process some drafts of the with the world’s big economies, a condition directive proposed barring non-EU managers accepted even by jurisdictions that in the and funds outright from access to European past have been renowned, rightly or wrongly, investors. Last autumn’s compromise as bastions of financial secrecy. will allow them to seek access to a new The many months of uncertainty over the EU single market for sophisticated funds European legislation did increase significantly from 2015, albeit two years later than EU the number of hedge fund managers ready managers and subject to rules that have not to consider using onshore structures and yet been written. comply with onshore regulation. Most There is plenty to complain about in the notably, it gave wings to the trend toward final AIFMD provisions, and plenty of room so-called Newcits, involving hedge fund for concern about the devil in the details strategies shoehorned into vehicles that that the new European Securities and comply with the EU’s Ucits regime for cross- Markets Authority is charged with drawing border retail funds. up. A number of offshore jurisdictions are The managers are taking advantage 14

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 11 A u d l e y C ap i ta l Audley Capital Best Event-Driven Manager

London-based hedge fund advisor Audley follow your losers and cut your winners. We Capital Advisors was established in 2005 wanted to change that pattern.” by activist investor Julian Treger and private Central to the firm’s investment philosophy equity investor Michael Treichl. Launched are and due diligence. that year, the Audley European Opportunities The team uses best practice from a number Fund generates by making of different investment disciplines, including opportunistic investments in distressed , activism, distressed and situations, creating value through financial deep . Audley tends to look and/or operational . at companies listed in Europe with market Because Audley orchestrates its own capitalisation between EUR150m and exit strategies, it considers itself to be EUR1.5bn that are either having financing more an “event-driver” than an event-driven difficulties, going through , or manager. The firm currently advises on some are potential buyout or M&A targets. Various USD900m in assets under management metrics are applied during this within Audley’s own funds and affiliated screening process. funds. Audley is regulated by the FSA, The investment phase involves rigorous while the fund is regulated by the fundamental research, due diligence and Financial Services Commission. meeting the management teams in person, The team consists of eight investment and as well as identifying suitable targets for three operations professionals, with Treger the exit stage. Executing the strategy is and Treichl at the helm. Prior to establishing then achieved by working with the chosen Julian Treger (top) and Audley, the pair had advised on some 46 Michael Treichl, co-founders, company’s management team to bring about investments worth more than USD3.7bn. Audley Capital the ‘event’, after which Audley exits the firm Between 1992 and 2004 Treger headed once its shares have reached fair value. Active Value Advisors, the UK’s first activist Market sectors in the fund’s portfolio fund manager, and he has more than 20 include mining, technology, infrastructure and years’ experience in shareholder activism energy services, with European companies and distressed investing, including the focused on emerging markets a particular restructuring of companies such as Saatchi preference. Audley ensures that no more & Saatchi and Signet. than 20 per cent of the fund’s gross assets Treichl has more than 25 years’ are locked up in any one company. experience in M&A advisory, private Following the financial crisis, relatively equity and distressed investing. He earlier few event-driven funds remain, according co-founded Bessemer Vogel & Treichl, to Treichl, who argues that in relatively flat and his achievements include co-leading markets, creating events to drive performance the acquisition and restructuring of Head- is more valuable than ever. “Everyone Tyrolia-Mares to prevent it going into expected a wave of distressed restructuring . which didn’t materialise,” he says. “We think Asked what sets Audley apart from it’s likely that default rates will rise as we get its competitors, Treger says: “What closer to the 2012-14 bulge in repayments defines us is attention to detail, private on leveraged loans, which could create equity-style due diligence, a deep value interesting opportunities for funds like Audley.” approach to investing, an understanding of Treger adds: “We feel gratified and macroeconomic trends and several decades thankful to have won this award. We see of experience. Friendly activism is quite a this as a vindication of our view that friendly skill. Hostile activism encourages you to activism creates superior returns.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 12 C ap i ta l s u pp o r t Capital Support Best Managed Account Platform Technology

London-based Capital Support was approach that allows the firm to resolve established in 2002 and is still privately issues in a fast, efficient manner, reducing owned. With offices located across the business downtime and helping to create a capital in Docklands, the City and the more stable, reliable IT environment. West End, the firm currently employs The firm offers clients a variety of approximately 80 people and considers itself services, including network and infrastructure a vertical specialist in financial services design, installation and maintenance, 24/7 technology. It is one of the UK’s leading on-site support services, communications IT solutions providers to the financial and and connectivity, business continuity professional services industry. such as data storage and back-up, and Capital Support’s team of directors Nigel Brooks, director, Capital specialist projects. includes Nigel Brooks and Dean Foreman, Support Last year, Brooks says, Capital Support both of whom have extensive experience identified industry trends including an in the IT industry. By offering a one-stop IT increasing number of fund managers service, Capital Support is able to provide investigating alternative providers or bespoke solutions to its clients, and in so platforms. “Traditionally, most organisations doing avoids the ‘one size fits all’ business wouldn’t easily change their technology approach as well as the bronze, silver and providers – the risk involved can prove gold packages that many IT support vendors daunting,” he says. “However, most funds offer the managed services industry. now realise that the increased service, cost Superior customer service lies at the heart savings and boost to productivity that can of Capital Support, which has helped it grow be realised by using the right infrastructure organically over the years. The firm’s ethos is far outweigh the risks of migrating to a new one of Smart Solutions, delivered using Smart technology provider.” Technologies, managed by Smart People. Capital Support’s strategy is one of Currently, the firm provides IT solutions continual investment in its technology to several hundred global organisations, infrastructure to ensure optimal redundancy including more than 160 alternative and resiliency in its underlying solutions. investment firms including private equity Says Brooks: “Over 2011 we expect to invest and hedge fund managers. One of the very further in our data centre technologies few IT support providers recommended by and infrastructure, including increasing our Microsoft to support the financial services presence in Europe and abroad to cater for industry, the firm was recently named among the number of international offices we expect the Top 100 Microsoft solution providers to start returning to the marketplace from worldwide by MSP Mentor. 2012 onward.” “Our clients range in type, strategy and Of winning the award, he adds: “We size,” says Brooks. “We provide services to invest heavily in our systems and staff a substantial range of alternative investment so that our service levels can continue to management clients, from small hedge exceed industry standards year on year. fund spin-outs to multi-billion-dollar asset We are therefore particularly delighted to management firms.” win the 2011 Hedgeweek Award for Best Capital Support’s ideology is that by Managed Account Platform Technology. As paying a fixed monthly fee, clients can an accolade voted for by the readership, it prevent small IT problems escalating into is truly independent verification that Capital potentially serious, and, by default, costly Support is indeed the provider of choice to ones. It’s this proactive, preventative the hedge fund industry.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 13 O v e r v i e w

11 of measures incorporated into the Ucits III legislation, finalised in 2002, that allow investment in derivatives and the use, within certain limits, of modest amounts of leverage. Their adoption of the highly-regulated Ucits regime as a vehicle for hedge fund strategies meets some of the needs of institutional investors in particular, but it also reflects the long-observed convergence of traditional and alternative investment. In addition, Newcits funds are starting to make the benefits of hedge fund strategies available to a broader investor base – although the implications of this development have yet to be fully thought through. In traditional European centres for retail funds such as Luxembourg and Dublin enthusiasm supposed to come into force by 2012 – Nigel Brooks, director at Capital Support, receives for the new business they bring is tempered although, as we have seen, deadlines can the award for Best Managed by concern about the risk of damage to slip – and the industry faces a renewed fight Account Platform Technology the Ucits brand, especially in new and fast- to convince legislators that short-selling from Cherie Lunghi growing markets across East Asia, the Gulf is a vital component of and Latin America. and price discovery rather than just a tool Alongside the offshore centres, the other for speculators to make money from the great survivor – so far at least – is London, misfortunes of others. which remains the dominant centre for Sometimes the industry contributes to its alternative fund management in Europe. own problems. The trial that has just opened Despite lurid reports to the contrary, the in the US in which hedge fund manager Raj hedge fund management industry has not Rajaratnam is accused of industrial-scale lighted out en masse for Zug or Pfäffikon – has tarred the industry as proof if it were needed that there are other a whole with an association with financial important considerations for managers crime that may be hard to shake off. Nor besides their income tax rate or non- does it help that barely a week goes by domiciled resident status. without news of the uncovering of another Over the past year the hedge fund Ponzi fraudster passing himself off as a industry has continued to face verbal hedge fund manager, unfair though the link assaults from politicians and others on might be. its modus operandi and impact on global The frustration for many in the industry is markets. Two years ago, it provided a that rational argument often seems to have convenient scapegoat for politicians who little impact on broad sentiment about hedge sought to pin on the industry much or all of funds in political circles and the media, in the blame for the and global the same way that no amount of regulatory economic downturn. co-operation and exchange of information A great deal of what was said and on tax matters seems capable of removing written at the time was demonstrably the tag of ‘’ from certain offshore nonsense, but its impact lingers to this day. jurisdictions. Aside from changes in direct regulation on However, the outcome of the long debate both sides of the Atlantic, managers are over the AIFM Directive does illustrate that facing restrictions on short-selling and/or the task is not entirely hopeless; it suggests disclosure requirements that could be equally that efforts to separate myth from reality damaging, the latest being the European and to provide insight into the complex role Parliament’s proposal to impose tough hedge funds play in the financial sector as conditions on ‘naked’ trading of credit default well as the wider economy is becoming swaps linked to sovereign debt. better understood, slow though the process The EU’s new short-selling rules are might be. n

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Learning to live with the AIFMD By Simon Gray

After more than 18 months of often-heated that the changes made during the drafting debate and a succession of drafts, frequently and negotiating process have resolved in contradiction with each other, in a many of the more controversial aspects process that sought to reconcile strongly- of the legislation and produced a text that held opposing positions, European Union all sides can live with – subject, of course, economic affairs and finance ministers and to the detail that must now be added in then the European Parliament finally agreed subsidiary legislation and regulations by last November on a (nearly) final version the newly-minted European Securities of the Directive on Alternative Investment and Markets Authority (Esma), successor Fund Managers. The directive is now set to the Committee of European Securities to take effect around mid-2013 after being Regulators, in association with the European incorporated into the legislation of EU Commission. member states. Most importantly for the industry, the The eventual outcome has left many of directive will offer non-EU-based funds and the participants dissatisfied to a greater or managers the opportunity to benefit from its lesser extent. Industry members believe that ‘passporting’ provisions for the marketing even after extensive changes to remove of products to sophisticated investors some of the most damaging or least throughout the 27-member union, albeit practical provisions, the directive still fails two years after EU managers with funds to take into account sufficiently the specific also domiciled in Europe. The extension of nature of different types of alternative fund. the passport regime is likely to lead to the Meanwhile, critics of the hedge fund industry abolition of distribution argue that it fails to rein in the industry arrangements under national rules, but effectively and that managers will easily be not before at least five years after the able to skirt its provisions. directive takes effect in 2013, and subject to However, there is a broad consensus certification that a level playing field exists 19

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 15 C u s t o m H o u s e G r o u p Custom House Group Best Asian Hedge Fund Administrator

Custom House was established in Ireland marketing executive based in Hong Kong in 1989 to provide a broad range of fund whose focus will be on Hong Kong and services to its clients. The group merged into mainland China.” Equity Trust on September 1, 2008, in effect The office is regarded as a key hub for becoming a joint venture between Equity the group’s expansion not only across Trust and the Custom House management. the Asia Pacific region but also as a cost- At that time, the holding company Custom efficient and high-quality operations centre House Global Fund Services was established for expanding business in the Americas in . The company now has more than and Europe. 260 employees and subsidiary offices in Fund formation, fund administration and Chicago, Dublin, Guernsey, Luxembourg, the Ralph Chicktong, managing shareholder services are the three primary Netherlands and Singapore. director, Custom House business offerings in all Custom House Singapore Custom House Singapore first opened its offices. Of all NAVs produced, approximately doors in April 2008 and has since grown to 25 per cent are for daily valuations (a more than 60 personnel. The office has a high percentage amongst administrators) twofold function, to provide a full range of and Custom House operates on a global fund services to a growing number of Asia 24/5 basis. Pacific region clients, and to process funds “We services funds of all sizes and managed by Custom House’s other offices. investment strategies, but the nature of the Combined with the services offered by Asian market at this particular point in time Equity Trust, Custom House is able to offer is such that opportunities exist with start-up a one-stop shop solution not only to funds funds,” Chicktong says. but to fund managers requiring services “A lot of our business in Asia has come including company formation, licensing, from start-ups and existing fund managers corporate and accounting. This synergy with looking to launch a second or third fund. Equity Trust also makes possible a broad To meet the opportunity in this market, we Dermot Butler accepts the range of products including and award for Best Asian Hedge have recently introduced a product called private equity structuring and servicing. Fund Administrator on behalf Nascent, a platform designed to assist start- As well as servicing clients in the of Custom House ups by giving them a low-cost formation and region’s more established fund servicing structure for the period jurisdictions of Singapore and Hong when they are endeavouring to Kong, Custom House Singapore is establish a track record.” expanding its reach by targeting Chicktong argues that India, China, Indonesia and other consistently high quality of service is emerging markets. what sets Custom House Singapore “We’re certainly looking at all apart from its competitors, saying: emerging markets,” says Custom “Irrespective of the size and profile House Singapore managing of the fund, we strive to address all director Ralph Chicktong. “We are client queries with professionalism regular attendees as sponsors and timeliness.” and delegates at seminars and He adds that winning the conference and have forged sound Hedgeweek award has come at relationships with a wide variety of an opportune time: “For funds intermediaries in a number of Asian both large and small, it reflects our countries. The thrust this year is to commitment and dedication to client concentrate on India and China. In servicing in the region. It’s certainly fact, we’ve just added a sales and an award we welcome.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 16 d A lt o n S t rat e g i c Par t n e rsh i p Dalton Strategic Partnership Best Long Short Equity Manager

Dalton Strategic Partnership, established the fund’s senior analysts, work alongside in 2002 by a group of ex-Mercury Asset Charlton, while the firm’s independent risk Management colleagues, is a global manager, Dr Philip Hua, offers advice on all investment management firm that manages aspects of risk. In-house traders Daniel Blake assets on behalf of institutions, family offices, and Tom O’Kelly ensure trading activity is charities, foundations, private clients and efficiently executed. retail investors. This is achieved through the The basic strategy, as employed by the use of specialist equity funds (all named Ucits Fund, is to achieve annual absolute Melchior), global portfolios returns of 8 to 10 per cent with volatility of and a private client business. 5 per cent irrespective of market conditions The firm has offices in London, Hong Magnus Spence, founding by taking long and short positions in listed Kong and Mumbai as well as affiliated partner, Dalton Strategic European equities. Partnership offices in Tokyo and Toronto. It is owned by DSP aims to deliver consistent its 16 working partners, including founding uncorrelated returns by combining a partners Andrew Dalton and Magnus fundamental approach to stock selection Spence, and had USD2bn in assets under with an active trading overlay, which helps management at the end of 2010. to reduce volatility as well as enhance Partner Leonard Charlton has been alpha generation. The fund has a record of managing DSP’s European Absolute Return positive returns in down markets, and has Strategy since joining the firm in 2006. generated an average short book alpha Originally launched as a Cayman fund, the component of 1.09 per cent per month Melchior European Fund completed its fourth since launch. consecutive year of positive performance “Fund managers understand that long with 16 per cent in 2010, following returns of positions can go up multiple times, whereas 8 per cent in 2007, 6 per cent in 2008 and 4 short positions can only go to 0, thereby per cent in 2009. capping returns at 100 per cent,” Spence A Ucits III-compliant version of the says. “Consequently, the industry tends to strategy, the Melchior Selected Trust: spend 90 per cent of its time looking for long European Absolute Return Fund was positions, which competes away the alpha launched in February 2010 and returned 10.3 on the long side. per cent with volatility of 4.2 per cent. The “We focus 50 per cent of our time on two funds were run as mirror images of each finding longs and 50 per cent on shorts. We other until September, when the leverage believe this helps generate alpha, particularly of the Cayman fund was doubled to offer a on the short side, and can maintain higher risk/return profile for investors. our record of producing uncorrelated Charlton, who has 13 years’ investment positive returns.” experience, began his career in 1998 as The strategy is made up of 40 to 60 liquid an equity trader for , then , with no structural bias to country, in 2003 joined GLG Partners as a portfolio sector or market cap. It maintains a low net manager with the European long/short team. exposure to equity markets, and the Ucits David Robinson and Benjamin Billiard, fund seldom employs leverage.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 17 d A lt o n S t rat e g i c Par t n e rsh i p

Adds Spence: “Our strategy is ideally suited for volatile equity markets such as 2010. The dispersion that emerged in European equity markets meant we were able to generate alpha equally in both the long and short books, while our active trading style helped reduce the volatility of returns.” n

Disclaimer All information in this document has been prepared by Dalton Strategic Partnership LLP. This document is issued by Dalton Strategic Partnership LLP, which is authorised and regulated in the UK by the Financial Services Authority. Any views and opinions contained in this document are those of Dalton Strategic Partnership LLP at the time of going to print and are not intended to be construed as Leonard Charlton, partner at investment advice. This document does not Dalton Strategic Partnership, receives the award for Best constitute or form part of any offer to issue Long/Short Equity Manager or sell, or any solicitation of any offer to from Cherie Lunghi subscribe or purchase, any shares or any other interests nor shall it or the fact of its distribution form the basis of, or be relied on in connection with, any contract thereof. Recipients of this document who intend to apply for shares or interests in the Funds are reminded that any such application may be made solely on the basis of the information and opinions contained in the prospectus or other offering document relating thereto, as and when they become available, which may be different from the information and opinions contained in this document. Performance are not necessarily based on audited financial statements and assume reinvestment of portfolio distributions. Past performance is not necessarily indicative of future results and you may not retrieve your original investment. For non-professional investors: If you have any doubt as to the suitability of the product, please consult your independent financial advisor. The securities referenced in this document have not been registered under the (the “1933 Act”) or any other securities laws of any other U.S. jurisdiction. Such securities may not be sold or transferred to U.S. persons unless such sale or transfer is registered under the 1933 Act or exempts from such registration.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 18 O v e r v i e w

15 for managers and funds whether inside or outside the EU. The final version also gives European sophisticated investors freedom – for now, at least – to invest on their own initiative with whichever managers they choose, and dilutes slightly the new responsibility laid on fund depositaries for the loss of assets in their custody, by allowing them to pass on liability to a sub-custodian. At one point it appeared that custodians would be subject to strict liability for losses by funds they serviced, whether or not they were in any to observe or prevent the wrongdoing or negligence responsible. Overall, the final compromise on the legislation has been met with widespread relief by members of the alternative investment fund industry, and also by alternative managers and create a coherent investors. In combination with other legislative approach to the management of systemic changes elsewhere in the world, it has risks as well as the impact of alternative contributed to greater certainty by providing funds on investors and markets within the EU. a clearer picture of the future regulatory It aims to address risks to investors, markets landscape in which managers, service and other participants through comprehensive providers and investors will have to operate. and common supervisory arrangements. In addition, to some extent the directive The authors of the directive, which applies formally enshrines in written rules practices to all types of fund not covered by the Ucits on which investors are now insisting in the directives governing cross-border retail funds, wake of the recent financial crisis, or that say it seeks to take into account the variety managers have already adopted. of investment strategies, techniques and assets employed by the diverse managers Management of systemic risks covered by the directive. Whether the The starting point for the directive is legislation has succeeded in this ambition is that managers of alternative funds are a matter of considerable debate as well. responsible for a significant volume both The directive creates a single European of invested assets in Europe and of trading internal market for alternative fund managers in markets for financial instruments, and and a harmonised regulatory framework for therefore can exercise a significant influence all alternative managers active within the on markets as well as on companies in EU, whether they are based within the union which they invest. or not. It provides for a two-year transition The preamble to the legislation argues period, after which non-EU managers and EU that the recent crisis has shown how managers of non-EU funds will gain access alternative managers can spread or amplify to the internal market, followed by a three- risks through the , and year period during which the harmonised that efficient management of these risks passport regime will coexist with national is difficult through unco-ordinated national private placement rules that are used for responses. While the accuracy of this distribution of alternative funds today. assertion is widely contested throughout Subject to an assessment by the the industry, members are resigned – as in Commission that the passport regime is the US – to broader and more burdensome working satisfactorily, the national private regulation as an inevitable part of the fall-out placement regimes will be terminated at the from the financial crisis. end of this five-year period through a fresh The legislation aims to establish common legislative act. In addition, the Commission authorisation and regulatory requirements for will review the application of the directive four

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 19 years after it has been brought into force in providers are effectively excluded has been the national legislation of member states, completely dispelled. to determine whether or not the regime for alternative managers has caused market Defining alternative investment fund disruption, whether it is consistent with managers the principles of the EU single market, and The directive applies to entities that manage whether it has created a level playing field for alternative investment funds as a regular all managers targeting European investors. business, including both open-ended and While the extension of the passporting closed-ended funds, regardless of the funds’ regime to non-EU managers and funds legal form or whether they are listed on a and the subsequent abolition of private , and that raise capital from placement arrangements is the core of the investors in order to invest according to a compromise that made final agreement defined policy. on the directive possible, many industry The legislation does not cover managers professionals in offshore centres say they of private wealth management vehicles such will believe it when they see it. as family office structures, nor of holding In particular, they are waiting for companies, although this does not exclude the level 2 subsidiary legislation and managers either of private equity funds or regulation and details of the regulatory of funds traded on regulated markets. Also co-operation arrangements with which non- excluded from its remit is the management EU jurisdictions will be required to comply of pension funds, employee benefit or saving before they acknowledge that the spectre schemes, institutions such as central banks, of a Fortress Europe from which outside local or national government bodies that 23

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 20 D e u t sch e B a n k Deutsche Bank Best Ucits-Compliant Product

Deutsche Bank is a leading global investment As the index sponsor, Deutsche Bank bank with a strong private client franchise. A calculates the index independently of Winton. leader in Germany and Europe, the bank is “We have seen a huge interest from continuously growing in North America, Asia investors since we launched the product in and key emerging markets. With more than June,” says Tarun Nagpal, European head 100,000 employees in 74 countries, Deutsche of global fund derivatives at Deutsche Bank. Bank offers unparalleled financial services “Winton’s long-standing reputation has made throughout the world. The bank competes this product particularly attractive to investors to be the leading global provider of financial who want to access the returns of a hedge solutions, creating lasting value for its clients, fund in a Ucits III format.” shareholders, people and the communities in Tarun Nagpal, European head As it is based on a quantitative strategy, which it operates. of global fund derivatives, developing a Ucits-compliant version of the In response to increasing investor Deutsche Bank Winton flagship fund required a good degree demand for alternative Ucits-compliant of innovation. Deutsche Bank’s objective products, Deutsche Bank decided to launch was to give investors exposure to Winton’s a Luxembourg-domiciled Ucits III variation expertise and track record in a Ucits III- of Winton Capital Management’s Diversified compliant format that brings the benefits Trading Program, a systematic trading system, of enhanced liquidity, and deliver a similar in June 2010 on its dedicated Ucits platform, level of performance to that of the Diversified DB Platinum IV. The result was the DB Trading Program. Platinum IV dbX Systematic Alpha . “It was key to allow Winton to invest in the The Winton Diversified Trading Program same instruments and with the same general has been running since 1997. The firm strategy as its Diversified Trading Program places great emphasis on scientific research while complying with Ucits requirements in financial markets, with some 90 staff at and, at the same time, to attend to investors’ its research offices in Oxford, London and Guillaume Mathias of Deutsche desire to address the tracking error between Hong Kong. Bank receives the award for the Ucits fund and Winton’s flagship fund,” Best Ucits-Compliant Product The dbX Systematic Alpha Index offers from Cherie Lunghi Nagpal adds. exposure to global futures, forwards and options markets. Winton selects the index components, providing exposure to approximately 100 global exchange-traded markets for including energies, base and precious metals and crops, equity indices, bonds, short-term interest rates and . The Systematic Alpha Index is a Ucits III- compliant financial index whose components are selected by Winton using the Diversified Trading Program. The index can be exposed to the same instruments and follows the same strategy as Winton’s system. The Ucits fund therefore gives institutional and financially sophisticated investors a strategy that while linked, does not give direct exposure to the Diversified Trading Program.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 21 D e u t sch e B a n k

Adds Nagpal: “Deutsche Bank has been structuring Ucits III funds since hedge funds started using the wrapper in 2001 and we are delighted that our efforts have been recognised by the Hedgeweek award. The structured products team and the global prime finance synthetic financing group work closely together to provide a variety of solutions to suit hedge funds’ needs, and they should both be acknowledged for their efforts in winning this award.” DB Funds currently has more than 60 Luxembourg- and Dublin-domiciled funds with assets under management of EUR12.55bn at the end of 2010. n

Disclaimer This advertisement has been prepared solely for information purposes and does not constitute an offer or a recommendation to Chris Farkas of Deutsche Bank enter into any transaction. Investments in the Global Prime Finance receives the award for Best Asian fund involve numerous risks including, among Prime Broker from Cherie others, general market risks, credit risks, Lunghi foreign exchange risks, interest rate risks and liquidity risks. The value of an investment in a Deutsche Bank fund may go down as well as up and investors may not get back their original investment. The Fund is intended for financially sophisticated investors who, based on their own investment expertise or that of their financial advisor, understand its strategy, characteristics and risks. The Fund bears counterparty risk from swap transactions, limited to a maximum of 10% of the Fund NAV according to Ucits III rules. The Fund’s swap counterparty is Deutsche Bank AG. Please refer to the relevant fund’s full prospectus and any relevant simplified prospectus for more information on Deutsche Bank funds. These documents are available free of charge from Deutsche Bank, London Branch. Deutsche Bank AG is authorised under German Banking Law (competent authority: BaFin – Federal Financial Supervising Authority) and is regulated by the Financial Services Authority for the conduct of investment business in the United Kingdom. The registered address of Deutsche Bank AG, London Branch, is Winchester House, 1 Great Winchester Street, London EC2N 2DB. Any direct or indirect distribution of this document into the United States, Canada or Japan, or to U.S. persons or U.S. residents, is prohibited. ©2009 Deutsche Bank AG.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 22 O v e r v i e w

authorised under the directive may manage or market alternative funds in Europe, and that they must continue to comply with its rules at all times, or risk losing authorisation. Authorised managers are limited in scope to the management of alternative and Ucits funds as well as of segregated portfolios under individual mandates, as well as providing certain non-core services such as providing investment advice and the safekeeping and administration of fund shares or units. Managers must apply for authorisation to the regulator of their home member state or, in the case of managers based outside the EU, the member state of reference, which 19 manage social security and pension systems, Jeroen Tielman, chief should be the country with which they have executive of IMQubator, securitisation special purpose vehicles, receives the award for Best the strongest link, either through the domicile contracts and joint ventures. Seeding Platform from Cherie of funds or marketing focus. Nor does it apply to individual portfolio Lunghi They must provide the relevant regulator management services provided by investment with information on the shareholders of firms authorised under the Markets in the fund management business and the Financial Instruments Directive (MiFID) in executives involved in its operations, its respect of alternative investment funds. organisational structure, remuneration The directive does not regulate alternative policies and practices, and any delegation investment funds, which continue to be or sub-delegation of management functions. regulated and supervised at national level The information required also covers the (if at all). It therefore allows member states strategies, risk profiles, use of leverage to continue to set national requirements and other characteristics of the funds regarding alternative funds established on the company intends to manage, the their territory. fund domicile, fund rules or incorporation The directive provides the of a less documents, and the appointed depositary. burdensome regime for alternative managers For authorisation to be granted, the national whose combined assets under management regulator must be satisfied that the manager total less than EUR100m, and for managers is capable of complying with the directive, has of unleveraged funds with assets totalling sufficient capital and assets, and is run by less than EUR500m with a lock-up period individuals with sufficient experience and of for investors of at least five years, on the good reputation. If the manager is a subsidiary grounds that such funds do not pose any of an investment or other business authorised significant . in another EU member state, their regulator Managers falling into these categories must be consulted. should be subject to registration in their The regulator may restrict the scope of home member state and provide regulatory a manager’s authorisation, notably with authorities there with information about the regard to their expertise and experience in instruments in which they are trading and the strategies of funds they are applying the principal exposures and concentrations to manage. A decision on a manager’s of the funds they manage. However, these application for authorisation must be managers also have the choice to opt for full delivered within three (or in exceptional regulation under the AIFM Directive, should cases six) months. they judge it worthwhile in terms of their Authorisation may be withdrawn if the marketing appeal and investor base. manager does not make use of it within 12 months or otherwise ceases activity, if Authorisation of managers authorisation has been obtained through false The directive provides that only managers information, or if the manager no longer fulfils 26

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 23 I M Q u bat o r IMQubator Best Seeding Platform

Netherlands-based seeding platform company then gives IMQubator’s investors IMQubator has a simple mission: to deliver a chance to benefit actively from the fund’s high absolute returns to its investors by growth. Emerging managers must, however, investing in new, up-and-coming investment buy in to IMQubator’s philosophy of ‘guiding managers. The multi-manager fund uses and monitoring’. a structure comparable to a joint/shared As all of the funds selected are located account. IMQ Investment Management is in the same Amsterdam office space as investment manager, selecting and managing IMQubator, it allows the firm to mitigate each new addition to IMQubator and actively risk by closely monitoring managers’ monitoring them on a weekly basis. performance. Different limits are set with

“We demand that in their first years of Jeroen Tielman, chief individual managers to minimise investment- operation new teams establish their business executive, IMQubator related risk. centre on the same office floor as IMQ,” It’s this approach to close risk monitoring says the firm’s chief executive, Jeroen and business guidance that, in IMQubator’s Tielman. “This enables us, among other view, adds value to its investors. “We things, to have weekly CIO-to-CIO meetings assist with the design of , with emerging managers and monitor their providing end-investors with more power business development closely.” in case misalignment of interests occurs Alongside Tielman, other members of the between the manager and the investor,” IMQubator team include chief investment Tielman says. officer Rikard Lundgren, chief operating and To help its fund managers grow and financial officer Remco Zomer, and Quirijn attract assets, IMQubator is available for van de Weg. meetings with prospective investors as well Most institutional investors often avoid as sharing due diligence; the firm has full investing in emerging managers with no transparency on the trading positions of established track record and possibly a each fund. small volume of assets under management. Currently, IMQubator’s portfolio consists Nevertheless, IMQubator believes of seven funds across a range of strategies. nimble start-ups offer some interesting Capital is available to seed a further three characteristics, most notably higher returns. funds, which will likely happen in the second The new kids on the block are driven to and third quarters of this year. In terms of outperform their established peers, and in optimal size, the portfolio can accommodate doing so attract assets. up to 15 emerging managers. To support “We believe that experienced investment growth, IMQubator plans to raise an additional managers who leave their employer to start EUR200m to EUR250m overseas, including their own asset management boutique EUR125m in additional seeding capital. generate a higher return for investors in On the award, Tielman says: “We are very their first years of independent operation honoured that the readers of Hedgeweek compared with returns generated by mature have selected us as the best seeding hedge fund managers,” Tielman says. “This platform only two years after IMQubator was difference could amount to between 2.5 and founded. We see it as great recognition for 5 per cent annually.” our investors, our team, our set-up and last The seeding model used by IMQubator but not least for the teams we have selected. involves committing EUR25m against reduced It encourages us all even more to expand fees in a three-year lockup. A 25 per cent our international reach to both emerging stake in the selected fund’s management managers as well as innovative investors.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 24 I M S G r o u p IMS Group Best North American Regulatory Adviser Best European Regulatory Adviser

The London-headquartered IMS Group is a 800lb gorilla. “We intend to become a much leading provider of consulting and integrated larger company to service our clients better business support to the asset management across all time zones,” he says. “We hope and securities industry. The group’s core to attract bigger clients who want the same service offering is regulatory compliance compliance manual wherever they are – be it consulting to UK-regulated financial Hong Kong, London or New York.” services firms. The acquisition illustrates the group’s IMS supports more than 600 investment commitment to broadening its array of businesses, ranging from established global resources and expertise as global regulatory firms to start-ups. Its clients include many issues become more complex. “Quality of of the world’s largest hedge funds, private Michel van Leeuwen, chief compliance is becoming paramount as the equity firms, funds of funds, family offices executive, IMS Group industry evolves,” says Van Leeuwen, adding and institutional pension funds. that the firm has a three-pronged plan As well as offering ongoing compliance following the acquisition. consulting, IMS has offered a complete FSA “First, we want to keep growing our application project management service since market share in the UK; secondly, we want 1997. Its FSA regulatory transactions team a 20 per cent market share in the US and is the country’s only dedicated regulatory Asia; and thirdly, we want to underpin it all application team and the largest provider of with technology to ensure we’re delivering applications for wholesale investment firms to consistent quality to our clients.” the UK regulator, processing more than 100 The group’s New York office regulatory applications a year. services include offering expertise on state The management team is headed by registrations and regulatory requirements for group chief executive Michel van Leeuwen, both investment advisers and broker-dealers. while founder Scott Wilson is a non- Alan Leale Green accepts Guidance is offered to broker-dealers seeking executive director. the awards for Best North to do business in the US through the Finra Over the years, IMS has continued to American Regulatory Adviser business planning and membership filing and Best European Regulatory innovate and evolve, and the firm has Adviser on behalf of IMS procedures, in addition to helping firms obtain developed six core business offerings the required Finra regulatory approval comprising regulation and compliance, as a result of changes or additions to accounting and tax, portfolio risk its business practice post-registration. management, hosted regulatory IMS also helps firms in the US permissions, education and training, seeking to register as investment and recruitment. advisers with the SEC, including, for Sovereign Capital, a UK buy example, preparation of the Form and build specialist, made a major ADV and applicable schedules along investment in IMS in November 2010. with annual updates and filings of all In February this year, IMS acquired SEC required forms. The firm’s US MMS Regulatory Solutions, which is expertise extends to recommendations regarded as one of London’s premier concerning whether or not SEC or compliance consultancies. Finra registration is warranted. According to Van Leeuwen, IMS Van Leeuwen adds: “The wants to consolidate the sector, since Hedgeweek voters are valued clients, it is still relatively regionalised and so we’d like to say a very big thank to fragmented; there is no proverbial all those who voted for us.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 25 O v e r v i e w

23 the conditions laid down in the directive or financial incentives to undertake or tolerate infringes other conditions. National authorities risky behaviour. These provisions may be should provide information about the grant or applied in different ways depending upon withdrawal of authorisations to Esma, which the size of the manager and of the funds will keep a public record all managers they manage, their internal organisation, authorised under the directive. and the scope and complexity of their The directive covers both external and self- activities, and will be overseen by Esma in management of funds. Self-managed funds line with existing EU recommendations on are subject to the directive in the same way remuneration applicable elsewhere in the as managers and in addition may not manage financial services sector. other funds. Alternative investment fund managers should provide at least investment Role of the depositary management services, but they may also The directive requires the appointment of offer other services including administration a depositary separate from the manager to and marketing of funds, management of carry out functions such as the safekeeping discretionary accounts, investment advice, of assets. The rules applying to the role shareholder services and record-keeping. of depository vary according to the type of Authorised managers should maintain business model followed by the fund manager robust governance controls and be managed and the kind of assets in which the funds are and organised to avoid or minimise conflicts investing. For funds with investment lock-up of interest. Minimum capital requirements periods of at least five years or those that are calibrated to ensure the stability of fund invest in illiquid assets for which custody may management activity of funds and cover not be appropriate, including private equity, professional liability exposure – at least and real estate funds, member EUR300,000 in initial capital for internally- states may authorise service providers such managed funds and at least EUR125,000 for as notaries, lawyers or registrars to carry out the external manager of one or more funds, depositary functions. increasing on a sliding scale to a maximum For other types of fund the depositary of EUR10m according to the total volume of should be a credit institution, investment assets under management. firm or another type of The directive requires managers to draw permitted under the Ucits directives. This rule up remuneration policies and practices does not apply to non-EU funds, but in this consistent with sound and effective risk case the depository must be a similar type management for staff whose roles have a of institution and subject to regulation and material impact on the risk profile of the supervision equivalent to that in force within funds managed; they should avoid creating the EU. The depositary must have its head

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office or a branch in the country in which the fund is domiciled, although it is suggested that the Commission draw up a legislative framework for an internal market that would allow depositaries in one member state to provide services in another. The depositary is responsible for monitoring the fund’s cash flows and the allocation of investor funds, safekeeping of the fund’s assets, including the custody of financial instruments, and verification of other assets held by the fund or by the manager on the fund’s behalf. Safekeeping of assets can be delegated to a third party or sub-delegated, subject to the suitability of the third party. A prime broker can only act as a depositary if the prime brokerage Mike Wariebi from Lazard for the proper valuation of assets and the Asset Management accepts and depositary functions are kept separated the awards for Best funds they manage, a function that should and any potential conflicts of interest are Diversified Fund of Hedge be independent of the portfolio management identified and disclosed to fund investors. Funds Manager and Best activity of the business and not vulnerable Manager The depositary is liable for the loss of to conflicts of interest; they may appoint an financial instruments in its custody unless external provider to carry out the valuation it can prove that the loss was due to an function. Managers may delegate or sub- external event and was unavoidable despite delegate responsibility for some management all reasonable care. It is liable in the event functions to increase the efficiency, as long as of other losses where these arise as a result the manager remains at all times responsible of intentional acts or negligence on the part for the proper performance of these functions of the depositary or its staff. In the event of as well as compliance with the directive. losses under a sub-custody arrangement, Managers must issue an annual report the depositary may escape liability if there for each EU-based fund they manage or (if a is a contractual transfer of liability to the not-EU fund) that they market in the EU. They sub-custodian and the arrangement has must also disclose information on the level of been agreed in advance with the fund and leverage used by funds they manage, whether the manager. through borrowing of cash or securities or via This formulation represents an positions and the reuse of assets. improvement from earlier drafts of the They must demonstrate that the leverage directive, which proposed strict liability of limits set for each fund are reasonable and depositaries for any non-market related losses that that they are complied with. Additional to investors, whether or not they were in disclosure requirements apply to companies any position to detect or prevent the loss. over which funds managed by an alternative However, again much depends on the precise manager exert control (in practice, usually wording of the level 2 measures that spell out private equity managers), especially in the the specifics of depositaries’ responsibility. case of unlisted companies. The threat lingers of a substantial hike in depositaries’ fees (which ultimately would be Marketing to EU countries borne by the investor), or of a withdrawal from Subject to compliance with the provisions the market by providers that cannot achieve of the directive, an authorised manager may adequate remuneration for the additional risks market shares or units of EU-domiciled funds they will have to run. Market professionals to sophisticated investors throughout the say such a result would defeat the ostensible union. To market a fund in its home country, purpose of the change in depositaries’ the manager must submit a notification to responsibilities, which is to protect investors. the regulator, which must deliver a decision The directive also requires alternative within 20 working days. It may only refuse managers to implement valuation procedures permission if the manager is not in full 30

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 27 I n d i a C ap i ta l M a n ag e m e n t India Capital Management Best Absolute Return Fund Dr Jon Thorn, a former London-based stocks in all-cap companies and is usually business journalist who later worked at roughly evenly split between small and mid- Drexel Burnham Lambert, is today one of the cap stocks on one hand and larger cap industry’s longest-serving India-only managers. names on the other. The firm is heavily With more than 16 years’ investing experience, overweight the banking and financial services he is an acknowledged expert on India’s sector, a structurally high growth industry economy and capital markets. Since launching in India. It has relatively little exposure to the flagship India Capital Fund (initially known export-intensive industries such as software, as the Indian Smaller Companies Fund) in pharmaceuticals and textiles, and is also 1994, Thorn’s India Capital Management has underweight or absent from various major established a solid investment track record in Dr Jon Thorn, founder, India index constituents, such as telecoms. Indian public equities. Capital Management Thorn says India’s markets did particularly The firm currently manages around well in 2010, and he was surprised by USD500m in assets under management, how strong its GDP growth was quarter- comprising some USD400m in the India Capital on-quarter. “We’re overweight banks, Fund and the remaining USD100m spread whose earnings were good last year,” he across its two other funds, the India Institutional says. “Banking and financials was one Fund and India Capital Opportunities. of two sectors that recorded the largest The India Capital Fund is domiciled in positive variance from consensus earnings Mauritius, where it is administered by a four- estimates. Our portfolio positions are in all- strong team led by Sudesh Lala. The fund’s cap companies; we’re not index-driven but assets are held in segregated accounts focused on where the earnings are.” and administered by Goldman Sachs Mumbai-based India Capital Research, Administration Services in Dublin. KPMG the firm’s research arm, is headed by Dan (Mauritius) provides auditing, with Deutsche Tennebaum. Having an on-the-ground Bank (Mumbai) serving as custodian. presence in India enables thorough, objective ICM uses a fundamental bottom-up analysis of potential portfolio companies to approach to investing in conjunction with be conducted and, if need be, for personal thematic research to help identify emerging visits to be arranged. The research team hails growth sectors. It invests with a multi-year from across the subcontinent. India Capital horizon and the fund does not actively Management’s investment team and affiliates engage in short selling or look for short-term have more than 35 years’ of combined returns; it uses no leverage. investment experience in the country. Since 1994 the fund has consistently In response to the dearth of public outperformed India’s USD Sensex Index from information on Indian companies, ICM has the Bombay Stock Exchange. The annual developed Compass, a proprietary database return of the fund as of end-November 2010 listing over 4,000 Indian equities. It is used was 23.9 per cent, compared with a 17 per purely as a research tool, never to select and cent return in the BSE30 in US dollar terms. execute . Sectoral plays over the years have included Thorn says: “We feel very proud to have public sector banks, agricultural commodities, won this award. The whole team has put in a and more recently, rising discretionary income huge amount of time and energy to get to this media and retail financial services. level of performance, and we hope our level of The portfolio typically holds 25 to 35 outperformance will continue.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 28 J P F u n d A d m i n i s t rat i o n ( C ay ma n ) JP Fund Administration Best Offshore Hedge Fund Administrator JP Fund Administration is a - JPFA is part of the JP Fund Group of based fund administrator offering services companies which, through its collective to asset managers in all styles of alternative expertise and external service providers, investment management. The choice to offers investment managers a full range establish in the Cayman Islands was based of support services including fund on its well-established legal and regulatory establishment and documentation, legal framework, which has made it the leading fund support, banking and brokerage facilities, jurisdiction for the overwhelming majority of including execution and custodian offshore alternative investment fund managers. introductions, and establishing independent The Cayman Islands Monetary Authority director and arrangements. granted JPFA an unrestricted The group has developed a range of Martin Laidlaw, managing administrator’s licence in November 2008, director, JP Fund services to assist asset managers moving allowing the company to offer clients a full Administration (Cayman) from managed account-style operations range of administration services including to running their investment strategy within NAV calculation, fund accounting, transfer a fund structure, as well as catering for agency and share registry services. existing fund managers’ ongoing needs. To meet the demands of today’s investors, Services include cost-sensitive structuring investment managers, auditors and regulators, solutions in a number of jurisdictions the company’s management believes it is that often provide more conflict-free fund essential to have experienced staff and a governance structures than are normally software solution that is functional, flexible possible in traditional funds. The cost-saving and scalable. JPFA has been building its initiatives have been scaled to suit funds presence in Cayman over the past two years large and small. by continuing to hire key staff to service its Growing requirements for transparency, growing customer base as well as moving accountability and independence, particularly to larger offices to accommodate all locally- in light of events during the global based staff under one roof. financial crisis, have increased demand for JPFA uses the PFS Paxus administration independent fund service professionals that system, a fully integrated platform developed JPFA is well placed to meet. The firm is also by Pacific Fund Systems. Managing director looking to expand its global scope through Martin Laidlaw acknowledges the need for initiatives in the significant US market and up-to-date, efficient systems: “Our clients increasing openings in Asia and Australasia. need timely and accurate information, and Of the award, JP Fund Group executive our focus on technology ensures we remain chairman and JPFA director Philip Griffiths at the forefront of the industry in delivering says: “We’re very proud of our achievements on our clients’ expectations. to date and excited by future opportunities. “We are continually reviewing our use We look forward to continuing to grow the of technology to create efficiencies and to business while maintaining the same values. improve investor and investment manager Being recognised by our industry peers and experience.” JPFA is looking forward to clients proves we have the right client focus further technological enhancements in and business model. We’re also proud that collaboration with its service providers to Capricorn FX G10 SP, a fund established and increase the utility and scope of its offering administered by the group, has also been to investors and managers alike. voted Best Managed Futures Fund/CTA.” n

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27 compliance. If the decision is positive, the manager may begin marketing the fund as soon as it has received notification from the regulator. The manager also applies to its home regulator if it wishes to market a fund in one or more other EU member states, providing a notification in respect of each fund and targeted market. As long as the manager meets the terms of the directive, the notification file, including supporting documentation, must be transmitted to the regulator of the target market within 20 working days. Once it has received notification that the application has been transmitted, the manager may immediately begin marketing in that country. Phil Griffiths accepts the passport regime has been in place for three award for Best Offshore Hedge An authorised manager may also manage Fund Administrator on behalf years, national private placement arrangements funds domiciled in other member states of JP Fund Administration are scheduled to be abolished as long as the either directly or through a branch. It must Commission has certified that passporting is submit details of the management activities working satisfactorily for all managers. or branch to its home regulator, which in An EU manager may manage non-EU funds turn must transmit the documentation within that are not marketed within Europe, subject two months to the authorities of the member to all the directive’s requirements apart from state where the manager proposes to carry those relating to the depositary and annual out management activities. report in respect of those funds. Co-operation Member states are free to allow the arrangements must be in place between the marketing of alternative funds to retail supervisory authorities of the manager’s home investors on their territory if they wish, member state and the regulator of the fund irrespective of whether the funds are located domicile to facilitate regulation of the manager in that country, another EU member state or and monitoring of systemic risk. As with in a non-EU country or territory. In this case, other provisions regarding non-EU domiciled they may impose stricter requirements on the funds and managers, the directive requires manager or fund than those applicable in the the Commission to establish a framework case of professional investors, but they may for establishing co-operation arrangements not impose stricter or additional requirements with third countries, and Esma to draw up on funds from other member states than guidelines on how these measures are to those applicable to domestic funds. be implemented. Once the passporting system has been Third-country managers and funds extended, EU managers may market non-EU There is a two-year transition period after the funds (or EU-domiciled feeder funds invested final deadline for transposition of the directive in non-EU master funds) to sophisticated into national law around mid-2013 before non- EU-based investors. This is subject to EU alternative fund managers can become co-operation arrangements being in place eligible for a passport to perform management between the manager’s home regulator and and/or marketing activities within the EU, and that of the fund domicile, certification that the for EU managers to market non-EU funds domicile meets Financial Action Task Force under the passporting arrangements. standards on countering money laundering Esma will have oversight authority, power and terrorist financing, and the conclusion to decide authorisation questions on which of OECD-standard tax information exchange regulators from different EU member states agreements (Tieas) between the fund disagree, and a co-ordinating role in the domicile and the manager’s home member exchange of information between national state as well as any other EU countries in regulatory authorities. After the universal which the fund is to be marketed. 34

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 30 L i n e d ata Linedata Best Fund Accounting and Reporting System

Linedata is a global solutions provider today, while at the same time giving funds serving the investment management and the ability, in real time, to manage and credit community. Headquartered in France, report on their NAV, P&L and exposures as with offices in Europe, North America and needed. Transparency is delivered through Asia, Linedata was established in September in-depth historic position-keeping, providing 1998. More than 700 clients operating out a full audit trail to help fund managers meet of 50 countries now count Linedata as a investors’ growing due diligence demands. service provider, from global banks and Every trading position and exposure can major financial institutions to small asset be aggregated by fund, asset class, sector managers and start-up hedge funds. and strategy, a firm-wide view that enables With respect to its corporate structure, Anvaraly Jiva, founder and traders to react quickly to market fluctuations. Linedata has a four-person executive board chief executive, Linedata Linedata Beauchamp is designed with a headed by founder and chief executive FIX-enabled multi-asset class trade blotter, Anvaraly Jiva, who joined the GSI group, making the creation and allocation of orders one of Linedata’s three predecessor between funds, books, strategies and prime firms, in 1978. Yves Stucki heads product brokers a simple process. development and Michael De Verteuil Electronically-received trade executions focuses on the firm’s acquisition process, are automatically booked and allocated, while Denis Bley has been chief financial enabling managers to see trading positions officer following his arrival at the firm in updated in real time. In addition, the May 2008. product’s trading ledger module allows fund Linedata has an active acquisition and managers to produce standard accounting integration strategy. A notable recent reports such as trial balance and balance acquisition, in December 2005, was sheet reports. Beauchamp , a firm Linedata Beauchamp’s clients include specialising in portfolio management some of the world’s largest and most software solutions for hedge fund managers. successful hedge fund managers. The vast Since this acquisition, Linedata has been Adrian Andrews accepts majority signed up as start-ups; helping new committed to and is an active participant in the award for Best Fund funds get up and running quickly is a major Accounting and Reporting the hedge fund community. System on behalf of Linedata strength for Linedata. Its core hedge fund product is The Alpha Approach, a dedicated Linedata Beauchamp, winner of the offering of products, services and 2011 Hedgeweek Award for Best Fund connectivity, was designed specifically Accounting and Reporting System. with the needs of the start-up in mind, Beauchamp and other complementary and built around Linedata Beauchamp products within the hedge fund and the firm’s order management solution set have helped Linedata system, Linedata Longview. position itself to target the growing On winning the award, Jiva says: hedge fund markets in the US, Asia “We are very proud to have been and the UK. selected by Hedgeweek’s readers Linedata Beauchamp, the firm’s as the Best Fund Accounting and real-time portfolio management Reporting Solution. Being chosen solution, is currently used by more by hedge fund industry participants than 275 fund managers worldwide. is a huge accolade; it reflects our Its power lies in its flexibility to continued investment in our hedge handle all the complex assets and fund solutions and spurs us on to strategies employed by hedge funds improve our offering in all respects.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 31 LyA x o r s s e t M a n a g e m e n t Lyxor Asset Management Best Managed Account Platform

The Lyxor Managed Account Platform the hedge fund industry that started post- currently supports more than 100 managed crisis, according to Lyxor chief executive accounts totalling more than USD10bn in Laurent Seyer. “As investors’ demands assets under management and is today the have increased with respect to performance world’s largest such platform. It offers an expectations, risk management and unrivalled range of alternative strategies that transparency, so hedge fund managers have replicate some of the best-performing hedge become more willing to listen,” he says. funds in the industry. “Investors need to deploy more Recognising the importance that its to alternative strategies due to their investors now places on transparency, attractive risk/return ratios. At Lyxor Asset liquidity and rigorous risk management, Laurent Seyer, chief executive, Management, we’re confident that our Lyxor’s dedicated team of more than 40 Lyxor Asset Management managed accounts will continue to be an investment professionals is able to provide appropriate answer in 2011.” them with one of the industry’s most To illustrate the dedication Lyxor MAP advanced managed account models. places on staying ahead of the competition, Innovation is critical to Lyxor MAP’s this year has already seen it fill its pipeline, success and allows it to provide having launched five new funds in the space diversification, one of its key strengths, by of two months from managers including continuously enriching the platform with BlackRock, Advent and Visium. new best-in-class hedge fund managers Lyxor won a number of mandates from using a disciplined selection process. To institutional investors – they account for more that end, its 12-year track record helped than 80 per cent of the firm’s clients – last it add an impressive 18 new managed year as British, Dutch and Asian pension accounts in 2010, at the same increasing its funds as well as Asian corporate insurers and diversification by welcoming such prestigious distributors started switching their hedge fund hedge fund managers as Traxis, Caxton, investments into managed accounts. The firm Halcyon, Pioneer and Mariner. managed a total of more than USD25bn in Strategies often not found on other alternative investments at the end of 2010. managed account platforms that offer high Last year was a good one for the potential are supported by Lyxor MAP, platform in terms of performance. Its 20 best including distressed securities and emerging performers posted returns ranging from 12 markets. Its diverse range of strategies, along to 29.5 per cent across a range of strategies. with the security of its platform, make Lyxor Equity long/short is by far the largest strategy a stand-out candidate amongst investors. area with numerous managed accounts Furthermore, the platform’s systematic risk covering different geographical zones and controls, detailed reporting capabilities and sectors. CTAs, event-driven and weekly liquidity support Lyxor’s other key managers represent the next most diversified strengths of risk management, transparency strategies. Event-driven managed accounts and flexibility. represent the biggest strategy measured by The fact that investor inflows returned to assets, followed by CTAs. Lyxor in the second half of 2010, following Says Seyer: “We’re very proud to win this outflows registered in the aftermath of the award for the second time, since voters eurozone sovereign debt crisis, indicates represent not only industry professionals but the confidence with which investors view also investors. Lyxor MAP has confirmed its the platform. robustness and leadership throughout 2010, Last year saw the confirmation of and we have the ambition to stay first in the institutionalisation and consolidation in industry in 2011.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 32 o G i e r Ogier Best Offshore Law Firm

Ogier has one of the industry’s leading Ogier Cayman’s primary focus is on reputations when it comes to advising financial services. Legal expertise is offered global international financial institutions, in numerous areas that include banking having been at the vanguard of offshore and finance, corporate and commercial, financial market development for more than investment funds, private wealth, litigation 50 years. Its legal services department restructuring and insolvency, direct provides legal advice on all aspects of BVI, investment and infrastructure. Cayman Islands, Guernsey and Jersey law. The Cayman office has a strong and well- With some 52 partners and 187 lawyers, established client base, of which around Ogier is able to handle cases of any size 60 per cent consists of investment funds. and complexity and prides itself on its Peter Cockhill, managing Ogier currently acts for 42 of the largest ability to offer expert, efficient and cost- partner, Ogier Cayman 100 alternative investment managers. It effective legal advice. also acted on behalf of four of the nine Nine international offices from Bahrain to investment managers chosen by the US Tokyo means Ogier’s legal team is able to Treasury to partner in the Public-Private respond to client enquiries around the clock. Investment Programme. Its clients are spread Unsurprisingly, the firm’s expertise has been worldwide, from the Americas and Europe to frequently acknowledged within the financial Africa, Asia and Australasia. and legal communities through multiple Specifically, Ogier Cayman provides awards over the years; this year it has won offshore legal advice on fund formation and the Hedgeweek award for Best Offshore structuring, regulation and deregistration, Law Firm. as well as providing constant advice to Ogier Cayman currently counts more than existing investment funds, managers and 135 professionals among its ranks in both administrators. its legal and fiduciary services departments. A full range of administration services Recognising its importance as the world’s are offered to private equity, property and preferred offshore jurisdiction among fund mezzanine funds, while director and trustee managers, the firm appointed four new services are also offered (Ogier Cayman partners – Chris Russell, Nick Rogers, Angus holds a trust licence and a mutual fund Oliver Godwin accepts the Davison and Andrew Morehouse – to its award for Best Offshore Law administrator’s licence issued by the Cayman Cayman office at the start of 2010, further Firm on behalf of Ogier Islands Monetary Authority), widening Ogier’s breadth of Additionally, Ogier Cayman expertise. works seamlessly with the firm’s Commenting on the firm’s London and Hong Kong offices expansion, Ogier Cayman’s to provide Cayman advice in managing partner Peter all time zones. Oliver Godwin, Cockhill says: “Notwithstanding a partner in Ogier’s London challenging market conditions, office who accepted the award, our practice has grown says: “The key attributes that set considerably over recent Ogier apart from its competitors years, and winning this are depth of knowledge, award endorses the wealth of client service, innovation and experience and broad skill base transparency. We believe our accessible within Ogier. Being offshore legal services are named as Hedgeweek’s Best among the best in the world, Offshore Law Firm of the Year is and I thank the readers of a fantastic achievement for us.” Hedgeweek for voting for us.” n

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funds are domiciled (if within the EU) or where they will be marketed. If there are several possibilities, the manager may submit a request to all the member states that would qualify, which should decide between them within a month. Any disagreement on the designation of a member state of reference can be referred to Esma. The marketing of either EU-domiciled or non-EU funds within the European Union by a non-EU manager under the passporting regime involves the same procedures and timescales as for an EU manager, except that the manager submits applications to the regulator of the member state of reference rather than its home regulator. Again, non-EU 30 As with cross-border marketing of Laurent Seyer, chief executive funds are subject to the fund domicile having of Lyxor Asset Management EU-domiciled funds, once the universal receives the award for Best regulatory co-operation arrangements with passporting regime is in place managers can Managed Account Platform the member state of reference, complying apply for the distribution of non-EU funds with money laundering standards, and to their home regulator; either authorisation having Tieas in place with the member state or the transmission of notification to a third- of reference and all other EU countries in country regulator is due within 20 working which the fund is to be marketed. days of submission. Until private placement Oversight and enforcement of the provisions regimes are abolished, member states of the directive are largely in the hands of the may continue to allow non-EU funds to be home member state of the fund manager in marketed by EU managers on their territory question, or the member state of reference in without a passport subject to equivalent the case of managers based outside the EU, depository arrangements, regulatory although in some cases member states where co-operation arrangements with the fund funds are being marketed can act directly domicile and certification of AML compliance. to enforce the directive. Member states are responsible for laying down rules on sanctions Member state of reference applicable in the event of infringement of the Non-EU managers intending to manage or directive’s provisions. market EU-based alternative funds must Esma will have a co-ordinating role and in receive prior authorisation from their member certain cases will mediate between member state of reference, which plays the same role states in the event of disagreements. It as the home state of EU-based managers. will also be responsible for drawing up They must appoint a legal representative standards for the content of the co-operation in the member state of reference as a arrangements to be concluded by member contact point in the EU and conduit for any states with supervisory authorities outside official correspondence with EU regulators the EU and on arrangements for exchange of and investors, and to carry out compliance information. Esma may, for instance, provide functions. a standardised format for co-operation The manager’s home jurisdiction must agreements. also have concluded regulatory co-operation One additional element of the directive arrangements with the member state of that has aroused the ire of the alternative reference, the fund domicile (if different) and investment industry is the so-called asset- any other EU countries where the funds stripping rules, which are primarily aimed are to be marketed, and meet the standard at private equity firms but could also affect money laundering and tax information managers of certain hedge fund strategies. exchange conditions. Special rules on ownership of unlisted The member state of reference is companies include additional reporting determined according to where the manager’s requirements covering, for instance, any

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planned changes in employment or job of the regime and issue advice on the conditions. termination of national private placement In addition, for a period of two years regimes, upon which the commission will following the acquisition of control such again have three months to adopt a delegated managers are barred from carrying out, act. Either the European Parliament or the facilitating or encouraging any distribution, European Council may object to a delegated capital reduction, share redemption or act within three months from the date of repurchase that would reduce the company’s notification, a period that can be prolonged capital base or that would exceed its for an additional three months. distributable profits and reserves. Private Four years after the transposition date, the equity firms and other claim that these rules Commission is scheduled launch a review will place alternative funds at a disadvantage of the application and scope of the directive, compared with other types of private including its impact on investors, funds company owner, which will not have to prove and managers both inside and outside the the same amount of public information nor union and the extent to which the objectives face the restrictions on extraction of capital. of the directive have been achieved, as well as the respective roles of Esma and Toward 2015 and beyond national authorities in supervising alternative Various provisions of the directive are to fund managers operating in EU markets. If be implemented through delegated acts necessary, the Commission may propose adopted by the European Commission, amendments to the directive. It may also including thresholds for the lighter regulatory examine whether legislation is necessary regime, the treatment of managers whose to regulate the due diligence procedures to assets move temporarily above or below the be undertaken by European professional threshold for compliance with the directive, investors when investing on their own the definition of methods and calculation initiative in non-EU products including funds. of leverage, capital levels and professional What currently remains uncertain is the indemnity insurance, and the assessment starting point for the timetable. Last month and management of conflicts of interest. Jonathan Faull, director general of the Delegated acts will also set out rules on Directorate General for Internal Market and risk management, liquidity management, Services at the European Commission, wrote administrative and accounting procedures, to Carlos Tavares, acting chairman of Esma, valuation procedures, and permitted levels indicating that the directive is now unlikely to of outsourcing. They will be used in setting enter into force before June. When the directive standards for third-country depositories, as well was approved by the European Parliament on as the due diligence duties of depositories and November 11, the Commission expected it to the definition of the type of external event that come into effect in February or March. may relieve depositories of liability for losses. The process is currently at the stage Two years after the final date for of legal and linguistic revision to correct transposition of the directive into national any typographical or drafting errors and law, Esma is due to issue an opinion on the to ensure the internal consistency of the functioning of the passport regime in force directive’s provisions, followed by translation and of national private placement regimes, of the finalised text into the EU’s various and will issue advice to the Commission official languages. Once this is completed, on the extension of the passport to non-EU the directive will be formally adopted by the funds and managers. The Commission will Ecofin Council, which is scheduled to meet adopt a delegated act within three months (currently under the presidency of Hungary) of receiving Esma’s advice, taking into on May 17 and again on June 15. account criteria such as the effectiveness of A few days after its adoption the directive the internal market, investor protection and will be published in the Official Journal of the monitoring of systemic risk. European Union, and will enter into force on Three years after the European passport the 20th day following publication. EU member is extended to non-EU managers and funds, states will then have two years to transpose Esma will issue an opinion on the functioning the directive into their national law. n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 35 P e r e gr i n e C o mm u n i cat i o n s Peregrine Communications Best European PR Firm

London-based PR firm Peregrine and attain their business goals,” Payne Communications is currently Europe’s says, and raising assets and protection of largest hedge fund PR agency based on reputation are two key areas in which the the number of clients and their combined firm is involved. Good PR for hedge fund assets under management. Established in managers is always useful and can certainly 2003 by Anthony Payne, Peregrine delivers help put them on the radar of future potential communication results to companies on a investors. With respect to protection, Payne local or global platform, and has built up an adds: “It’s about reputational risk – ensuring award-winning reputation based on proven that nothing that could be damaging to our strategies and excellent client service. clients is published.”

Payne has more than 20 years’ industry Anthony Payne, founder, He notes that with every man and his experience and has been involved in a vast Peregrine Communications dog now blogging, social media has made array of financial PR strategies, such as protection much harder. There’s so much advising the first mainland Chinese company chatter over the internet that one hedge fund on listing its shares on the NYSE. Payne manager – Derwent Capital Markets – is even has focused more on asset management planning to launch a strategy based on data- in recent years, in particular the alternatives mining Twitter feeds. “Firms need to upgrade industry, because he felt that specialist their media monitoring because they need to communication was going “to become vital be able to respond quickly,” Payne says. “A for companies wanting to market themselves story in a blog can jump into a trade magazine – particularly hedge funds”. and then into the broadsheets very easily.” This has enabled Peregrine to build up a Hedge funds have always been viewed solid track record in delivering effective media as a secretive, esoteric world and have communications to a number of prominent understandably sought to shy away from hedge fund managers. , Cube the public gaze – after all, these are private Capital, GAM, Signet, Dexion Capital and funds they’re managing. Payne thinks they’ve Finisterre are just some of the hedge fund Anthony Payne accepts the been a little slow to hop on board the PR clients Peregrine currently supports. The award for Best European boat, but since 2008 “hedge fund firms that firm’s other areas of expertise include PR Firm have continued to prosper have become private equity and venture capital, wealth more transparent and open to PR”. management, structured products and Over the past couple of years, he banks and brokerages. says, the hedge fund industry has Currently Peregrine has affiliates in been the focus of a great deal of press London, Dubai, New York, Hong Kong, attention – particularly to do with insider Cologne, Madrid, Singapore, Sydney, trading, regulation and anything pertaining Moscow and Paris. Its team of 24 to . “There is very little professionals (including the Peregrine, tolerance for a lack of transparency the firm’s mascot) covers all major time anymore,” Payne says. “Madoff and the zones, allowing the needs of clients to credit crunch have done away with that.” be constantly met and maintained. Regarding the Hedgeweek award, “Peregrine’s job is to help clients he adds: “We’re always pleased to win utilise media and other communication another award. It shows that the industry channels to reach their target audiences is paying attention to what we do.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 36 P r i m e f u n d s o l u t i o n s Prime Fund Solutions Best European Fund Administrator

Prime Fund Solutions has been a pioneer Cash overdrafts are offered, using portfolio of fund servicing and financing to the holdings as collateral, which makes the alternative asset management industry since process simple, flexible and transparent. it was first established in 1969. The firm PFS has remained committed to keeping prides itself on its client-focused operating its core technology ahead of the competition model and counts its industry-leading by deploying the latest versions of Advent infrastructure and highly experienced staff as Geneva on the accounting side and Koger key differentiators in a competitive market. NTAS for shareholder servicing. Taking this In Europe, the firm has offices in London, best-of-breed approach to technology means Geneva, Luxembourg, Amsterdam, Dublin, that PFS has been able to handle clients’ Galway and the Isle of Man. Charlie Woolnough, European increasingly complex needs in areas such as Global hedge fund managers, funds of regional director, Prime Fund modified fee structures. Solutions funds, private equity funds and sovereign In Global Custodian’s 2010 Hedge Fund wealth funds are all clients of Prime Fund Administration Survey, the firm was in the Solutions. “In Europe we serve funds top two in its peer group league table, and of various sizes covering a variety of was the only administrator to receive more strategies,” says European regional director 150 Best in Class awards throughout all the Charlie Woolnough. “Our book of business service areas and rating categories. is split approximately 50:50 between single There are several reasons for Prime manager funds and funds of hedge funds.” Fund Solutions being so highly regarded By providing a full suite of services, by peers and clients alike: its international clients are able to focus on what they do footprint, client-centric service model, best – managing portfolios and keeping their superior fund accounting and best-in- investors happy – knowing that PFS has breed core systems, not to mention its the experience to handle all issues, both long and distinguished history, which big and small, related to fund administration clients appreciate. and custody. In the summer of 2010, PFS underscored The firm has received SAS 70 Type Usman Cheema accepts the its commitment to the sector II Certification in all three regions that it award for Best European Fund by launching PFS Horizon, a dedicated Administrator on behalf of operates, Europe, Asia and the Americas. service platform which it developed with IT Prime Fund Solutions Prime Fund Solutions has the capacity specialist Comada. Says Woolnough: to meet its clients’ needs, regardless of “We believe this new technology fund structure or regulatory regime, such represents a significant step forward as corporation, Ucits, master/feeder in the fund of hedge funds middle structure or special purpose vehicle, office and reporting arena. Our ability assets ranging from equity and fixed to provide greater transparency, asset income to private equity, and strategies safety and robust infrastructure are including arbitrage and managed futures. increasingly important factors for PFS provides a full range of our clients.” administration services from full NAV Regarding the award, he adds: “We calculation to shareholder services are delighted to have achieved the and corporate secretarial services. The greatest number of votes in the industry. firm also acts as custodian for funds We’re proud that our clients recognise of hedge funds, offering an advanced the effort we put into our administration product mix of forex, treasury and service and are committed to continuing financing. The financing product is to provide the highest level of client well known for its structural simplicity. service in the industry.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 37 O v e r v iew

Capital returns as investors regain confidence By Simon Gray

Should one tempt fate? In May 2008, Deutsche subject to inevitable caveats about the Bank’s sixth annual Alternative Investment impact of unforeseeable global events Survey forecast that despite the unfolding ranging from earthquakes across the Asia- meltdown of the US sub-prime mortgage Pacific region to political upheavals in North market and the bearish global economic Africa and the Middle East. However, there outlook, cautious investors were poised to is reason to believe that Deutsche’s ninth eliminate their cash holdings and pump more Alternative Investment Survey, conducted than USD200bn in fresh allocations into the in January by the hedge fund capital group industry over the coming months. within the bank’s global prime finance That was before a succession of business, may be on firmer ground in catastrophic events across the financial predicting an acceleration in the flow of industry culminated in the bankruptcy of assets back into the sector amounting to in September (topped off some USD210bn over the course of this year, with the uncovering of the Bernard Madoff boosting overall assets under management three months later), turning a year full by more than 10 per cent. of apparent potential into a rout and massive The survey, whose respondents included outflows from hedge fund managers that have public and private pension schemes, taken more than two years to make good. foundations and endowments, sovereign This year too any predictions must be wealth funds, funds of funds, private 41

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 38 A STEP AHEAD

In the competitive and challenging world of investing, PVE Capital has built the foundations of its success upon three pillars: People, Process and Performance. In a relatively short time this focused approach has reaped dividends for clients and established PVE Capital as a firm in the ascendant. Our people are committed, dedicated experts in their field. Working as a team or individually, each person brings something unique to the table. Our investment process is based on a culture of dynamic investment. We look at both the big picture, and the finer detail, before we make any decision. So that when it comes to performance, we can be one step ahead. Contact PVE Capital LLP One Vine Street London W1J OAH United Kingdom

Ronald Neumunz Head of Sales and Investor Relations [email protected]

Helene Schutrumpf Sales and Investor Relations [email protected]

Tel: +44(0)20 3206 7359 PVE Capital wins “Best Multi-Strategy Manager” www.pvecapital.com Award from Hedgeweek

ETF Awards 11.indd 1 15/3/11 17:37:27 P v e C ap i ta l PVE Capital Best Multi-Strategy Manager

PVE Capital is a European-based hedge fund manager and adviser established in June 2009 by Gennaro Pucci, Joe Vittoria and Christian Evans. Launched in October 2009, the Matrix PVE Global Credit Fund uses a macro approach to trading credit markets. Founding partner and chief investment officer Pucci has a successful five-year track record managing credit funds and is the fund’s portfolio manager. Key service providers include as broker, Quintillion as administrator and Daiwa Europe Securities as custodian. The Dublin-domiciled fund, which employs a standard 2 and 20 fee structure, returned Left to right: Joe Vittoria, collateralised loan obligations and mortgage- 21.95 per cent in 2010 and has seen its assets Gennaro Pucci and Christian backed securities. Evans, founders, PVE Capital grow to EUR150m. Unsurprisingly, given the The fund’s holding period for most firm’s views on the eurozone sovereign debt instruments is between one and three crisis, the fund delivered exceptional returns weeks, with a secured credit bucket that while exhibiting a strong negative correlation takes a six- to 18-month holding period. The to other markets and asset classes, including portfolio’s construction is 75 per cent macro -0.75 to the FTSE 100. credit and index and single name relative Commenting on winning the Hedgeweek value, and 25 per cent secured credit. award, Pucci says: “We are honoured to be Monthly liquidity is provided to investors. All voted by our peers and counterparties as trading positions in the fund are constructed the recipient of this award during our first within clear risk parameters that are visible full year as a fund, and we look forward to by risk management in real time through a building on this momentum as we continue top-tier proprietary system. to grow as a firm and deliver for our Regarding the eurozone’s volatile market investors through these historic times.” conditions last year as Greece was brought PVE Capital’s investment team uses a to its knees by debt, Pucci says that PVE top-down investment approach to identify Capital’s consistent view since launching the key macro themes and sectoral plays for the fund has been that a sovereign crisis would Global Credit Fund. Fundamental bottom- follow in the aftermath of a financial crisis, up credit analysis is then used to assess and that the fund was positioned accordingly. individual companies, combined with technical “We were surprised a few times by the analysis to find the best way to express these speed and magnitude with which political and fundamental views based on factors such as regulatory noise impacted the markets, but we price, liquidity and transparency. found a number of ways to express our views The fund has an experienced team while minimising exposure to this volatility by of traders across the spectrum of credit identifying instruments and trades exhibiting products including macro credit, index asymmetric pay-off profiles,” he says. relative value, single name relative value Before setting up PVE Capital, Pucci was and secured credit, trading asset classes a partner at Credaris, which he joined in including sovereign bonds, credit default 2005 as head of trading and where he was swaps, CDS indices and cash bonds as the sole portfolio manager for the firm’s well as collateralised debt obligations, USD140m Credit Fund. n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 40 O v e r v i e w

38 banks, investment consultants and family offices worldwide with a total of more than USD1.3trn in hedge fund assets – around two-thirds of the industry total according to some counts – found that investors expect capital inflows to hedge funds in 2011 to be four times the level in 2010, a year in which confidence remained brittle and market sentiment skittish. “Despite a challenging market environment over the past year, the hedge fund industry continues to trend upward, with investors predicting a fourfold increase in inflows into the industry in 2011,” says Barry Bausano, co-head of global prime finance and head of equities in North America. Inflows of the scale predicted by the Deutsche survey Gennaro Pucci, co-founder Anita Nemes, Deutsche’s global head of PVE Capital, receives the would bring total assets under management award for Best Multi-Strategy of capital introduction, says the investor in hedge funds to USD2.25trn by year-end, Manager responses indicate the extent to which the bank’s researchers say. hedge funds have become an established There are already signs that investors and central part of the industry. “Hedge are putting their money where their mouth funds now hold a widely accepted role within is. TrimTabs Investment Research and the overall asset management industry,” she BarclayHedge have reported that the hedge says. “More than 50 per cent of investors fund industry posted an estimated inflow of increased their hedge fund assets under USD2.9bn in January, the sixth straight month management last year, further cementing the of inflows and one notable for the fact that the industry’s place in the mainstream.” beginning of the year is historically a period of The report sees a broad range of indicators net outflows rather than inflows of new capital. that inspire confidence in the outlook for the “This inflow is very bullish for the industry. Again, investors are saying they industry because January typically delivers plan to cut the amount of cash sitting on a heavy redemption related to year-end,” the sidelines, with respondents expecting to says BarclayHedge founder and president reduce their cash position by a cumulative Sol Waksman. “Additionally, February is USD29bn over the next six months and 75 historically a strong month for new fund per cent saying they expect to hold less than subscriptions, and our preliminary data 5 per cent of total assets in cash by June. suggests that the industry took in as much In addition, the survey finds that as USD10bn last month.” consultants are increasing the number According to the Deutsche report, of clients to whom they provide advice institutional investors are increasing their on hedge funds, while 82 per cent of allocations and the size of their hedge fund consultants expect their clients to increase teams, which indicates significant future the proportion of their portfolios invested in growth. More than 70 per cent of pension hedge funds this year. schemes and more than half of all the An important factor is that most investors consultants surveyed added numbers to their are no longer significantly weighed down dedicated hedge fund teams last year, while by problematic investments that ran into more than half of all investors increased their trouble in 2008 and 2009; the majority hedge fund assets. “Investors’ responses of respondents have no, or relatively indicate a sustained, strong recovery,” says few, investments with managers that still Jonathan Hitchon, co-head of global prime have positions in side-pockets, or where finance. “Bullish sentiment on equities, redemptions are still gated or suspended. flows, and industry dynamics were the clear Up to now the money flowing back messages conveyed by the respondents to into the hedge fund industry has gone our survey.” disproportionately to well-established 44

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 41 S abr e f u n d M a n ag e m e n t Sabre Fund Management Best Market Neutral Fund

Sabre Fund Management is one of London’s helped the fund generate consistent returns. best-known hedge fund managers, having Commenting on last year, Hill says no first risen to prominence as a CTA in 1982. major themes dominated and there were no Its core business is quantitative strategies, real surprises, but she admits that May was becoming the first European hedge fund one of the worst months for equity markets. to use style investing as a means for “However, due to our dynamic style process, generating alpha. we were able to capture the sudden flight The philosophy behind style investing to quality and the short-term resurgence in is that investment managers pursue value, value and finish the month with a positive growth and momentum strategies for stock- return,” she says. picking. Sabre uses sophisticated quant Melissa Hill, managing That the Style Arbitrage Fund is quant- models that are able to detect and then principal, Sabre Fund based means it can react to the markets Management capitalise on the dominant themes in the regardless of what’s happening. “As quants market at any given time by screening arrays we aren’t required to have a view on the of data and forming predictive style models. market, but our models do give us unique Sabre’s management team includes insights into thematic undercurrents and the Melissa Hill, Dan Jelicic and Tom Stevenson. structure of equity markets,” Hill says. Hill, who joined in 1996 and has been Regarding her expectations for 2011, managing principal since 2005, when she while any deviation from the expected led a management buyout, is responsible for growth targets for Asia and the US will overall business strategy and development, lead to more equity market volatility, she is and chairs the firm’s board and risk confident that the fund is well diversified management committee. Jelicic is the architect to protect the downside. “The year could and lead portfolio manager of Sabre’s style well be challenging when you also factor in arbitrage strategy, heading the portfolio the spectre of rising inflation and political investment team, whilst Stevenson is the instability in the Middle East and North firm’s chief operating and finance officer. Africa,” Hill adds. The firm’s flagship Sabre Style Arbitrage Dan Jelicic accepts the award The Cayman-domiciled fund offers Fund – winner of the 2011 Hedgeweek for Best Market Neutral Fund monthly redemptions in US dollar Award for the Best Market Neutral and euro share classes. Key service Fund – was launched in August 2002. providers include LaCrosse Global Fund Sabre uses three uncorrelated alpha Services as administrator, KPMG as engines to capture long-term economic auditor, Campbells as legal counsel and trends in the market as well as short- Deutsche Bank as prime broker. term returns generated by investor On winning the award, Hill said: behaviourial activity. “It’s wonderful for Dan and the entire Overall, the strategy is one that team at Sabre to be recognised for combines elements of quant factor their huge achievement in generating methodologies with consistent risk-adjusted returns over the and dynamic style rotation to help years. However, this doesn’t make us validate and support fundamental market complacent. It spurs us on to try and views. This gives it a unique position keep winning and at the least to remain in the market neutral space and has in the top league for future years.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 42 S i d l e y A u s t i n Sidley Austin Best North American Law Firm

Sidley Austin has a premier global practice and trade repositories, and the MiFID review. in advising investment funds and advisers. Sidley has counselled industry groups such Sidley’s lawyers serve virtually every type of as the Managed Funds Association in relation investment fund and investment manager to recent regulatory developments. as well as other market participants. More The firm assists clients in developing than 120 corporate, securities and derivatives new fund structures and optimising advisory lawyers serve investment fund, investment structures. For example, its experience management and derivatives work worldwide. enables Sidley to provide investment Sidley’s principal strengths are its deep solutions for clients such as the structuring and sophisticated knowledge as well as and documentation of bespoke structured breadth and geographical reach. The firm Michael Schmidtberger, derivative products to finance exposure to an serves its clients in every substantive co-head of investment funds, asset or a basket of assets. advisers and derivatives investment management and fund discipline. Providing exceptional service to clients is group, Sidley Austin “In supporting our hedge fund manager one of Sidley’s top priorities. Its practice has clients, we are able to utilise our knowledge been recognised by numerous publications, across practice areas such as tax, including first-tier national rankings for its employment and market regulation, to private funds/hedge funds, derivatives & address a variety of matters,” says Michael J. futures and mutual funds practices in the Schmidtberger, co-head of Sidley’s investment 2010 inaugural Best Law Firms survey by funds, advisers and derivatives group. U.S. News & World Report; Best Onshore “Our clients also benefit from our Law Firm in HFM Week’s 2009 US Service experience across the investment Provider Awards and highly commended in management spectrum, from hedge funds to the same category at the publication’s 2010 committed capital funds to registered funds, European awards; Investment Funds Team as the lines of investment management are of the Year for the US from Chambers and increasingly becoming blurred.” Partners in 2008; top onshore (US) hedge With the recent and continuing changes fund law firm in 2006 and 2007 and second in the financial markets, Sidley’s breadth overall in 2008 and 2009 at Institutional and reach enable the firm to assist clients Investor’s Alpha Awards; and Best Law Firm with regard to regulatory requirements for Alternative Assets in the AsianInvestor across numerous jurisdictions and areas 2010 and 2008 Service Provider Awards. of focus. Over the past year, the focus of “Sidley is honoured to be recognised Sidley’s investment funds, advisers and by Hedgeweek, its clients and its peers for derivatives practice group has been on the the firm’s client service and sophisticated regulatory initiatives impacting the investment knowledge of the issues facing the investment management industry in the US, Europe and management industry today,” Schmidtberger Asia and the increased levels of activity by says. “The firm believes this recognition is a regulatory authorities in those jurisdictions. testament to the range of Sidley’s substantive Sidley has been counselling clients capabilities in a diverse array of practices regarding the significance of new global relevant to the hedge fund world.” n regulation, including the Dodd-Frank Act and Sidley Austin LLP, a Delaware limited liability partnership which operates at the firm’s related SEC, CFTC and state regulations. Both offices other than Chicago, London, Hong Kong, Singapore and Sydney, is affiliated with the firm’s US and European clients have been other partnerships, including Sidley Austin LLP, an Illinois limited liability partnership particularly focused on the European Union’s (Chicago); Sidley Austin LLP, a separate Delaware limited liability partnership (London); Sidley Austin LLP, a separate Delaware limited liability partnership (Singapore); Sidley Alternative Investment Fund Managers Austin, a New York general partnership (Hong Kong); Sidley Austin, a Delaware general Directive, as well as recently EU regulation partnership of registered foreign lawyers restricted to practicing foreign law (Sydney); and Sidley Austin Nishikawa Foreign Law Joint Enterprise (Tokyo). The affiliated partnerships on OTC derivatives, central counterparties are referred to herein collectively as Sidley Austin, Sidley, or the firm.

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 43 41 managers and large funds, but that may be firms. However, there is often a price to pay changing, according to the survey, which sees for managers in return for early investment; significant growth opportunities for smaller whereas 28 per cent of investors surveyed and medium-sized funds. Deutsche reports by Deutsche in 2010 would expect reduced that investors are no longer looking solely at fees for a day one investment, this year the funds with USD5bn or more in assets. proportion has almost doubled. Other indicators point to increasing Both seeding activity and size of seed investor risk tolerance that is already deals is expected to increase; it remains vital reducing the concentration of allocations to for the majority of new launches, whether the largest managers. While over 2010 as a in the form of a cornerstone investor or a whole more than 80 per cent of new inflows true seeding deal. Competition for seed went to firms with more than USD5bn in money remains stiff, according to the survey, assets under management, according to with one European seeding firm in Europe Hedge Fund Research, the industry’s largest receiving 250 applications in a single year, out firms accounted for only 51.6 percent of the of which they would allocate capital to 10. USD13.1bn in net new capital inflows in the The report says seeding is one area fourth quarter. where fund of funds products come into their Sixty-five per cent of investors surveyed by own for institutional investors, because on Deutsche anticipate that the average size of the whole the latter lack the resources, skill hedge funds to which they will allocate this and experience required for seed investing, year will be less than USD1bn, suggesting while due diligence is much more onerous that capital is poised to flow increasingly to and often calls for different skills. Meanwhile, managers with assets of between USD500m returns on successful investment can be and USD1bn. Start-up managers, who have extremely attractive. found the fundraising ground particularly The report predicts that funds of stony over the past two years, could also funds that can offer compelling seeding benefit; more than 50 per cent of investors products will be able to raise significant say they are prepared to invest on day one, volumes of assets from investors that compared with just 20 per cent in 2004. might not otherwise invest via funds of The number of new hedge fund launches funds. Managers seeded in this way may in 2010 exceeded the total in 2009, although also benefit in the longer term from direct Deutsche says a few headline launches investment on the part of end-investors that attracted the majority of capital, and the have already had exposure to them via the highest-profile launches came in the final seeding vehicle. quarter of the year. The report expects the In other areas the picture for funds of majority of new launches this year to come funds remain clouded, as the statistics for from former proprietary desk traders, in capital movements this year make clear. some cases cast loose by the Volker Rule According to TrimTabs and BarclayHedge, in the US, as well as second generation funds of hedge funds experienced managers from top-pedigree hedge fund redemptions totalling USD3.6bn in January, 47

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 44 S i mm o n s & S i mm o n s Simmons & Simmons Best European Law Firm

Simmons & Simmons’ hedge fund practice of the top 10 US funds with assets under has been advising hedge fund sponsors management exceeding USD5bn. and managers since the early 1990s when According to partner Richard Perry, last the alternatives industry started to flourish year saw an improvement in new launch across Europe. activity. “While the larger managers seemed It has the largest hedge fund team in to continue to dominate new allocations London of any law firm, comprising a core from investors, there were a number of big team of 14 partners and 40 other legal staff. launches gathering substantial assets under In addition, specialised lawyers outside the management in the European market which core team in London, including in the main kept us busy,” he says. “There has also been economies across Europe, are available to Richard Perry, partner, a huge amount for us to get involved in on advise on an array of issues pertinent to Simmons & Simmons behalf of the industry on the regulatory front.” hedge funds. Many of Simmons & Simmons’ hedge Simmons & Simmons combines in-depth fund clients are based in the UK and US, but experience with expertise in specialist areas they also include fund managers in France, that enables the firm to advise on a full Germany, Italy and Switzerland, as well range of areas including fund structuring, clients in Asia, serviced through the firm’s regulatory issues, derivatives and prime Hong Kong office. Key clients include Brevan brokerage documentation, ownership Howard, BlueCrest, and structures, employment, taxation and Lansdowne Partners. intellectual property rights. The firm has recently developed Navigator, The firm’s reputation is underscored by an online subscribable regulatory service, the fact that as of the end of 2010 the firm in response to client demand for guidance Richard Perry accepts the was advising 32 of the top 50 hedge funds award for Best European Law on regulations globally on the marketing in Europe. It also provides advice to six Firm from Cherie Lunghi of funds and also on share disclosure and short selling. The service currently covers more than 80 countries around the world and is proving popular with clients. Commenting on the fund marketing service in the context of the recent growth of Newcits funds, Perry says there seems to be increasing interest in the rules relating to marketing alternative Ucits internationally. “We estimate that 70 per cent of our Navigator subscriber base now manage one or more alternative Ucits strategy funds,” he says. “Although the service covers all types of fund structure, there seems to have been an increased level of interest recently from clients wanting to promote Ucits funds.” On winning the award, Perry adds: “This award reaffirms our position as the leading firm in European hedge funds and is a reflection of our desire to place client relationships and service at the heart of our business.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 45 V e n u s C ap i ta l Venus Capital Best Relative Value Manager

Venus Capital was established in Boston in leverage, he says: “Short-term thinking by 1994 and regards itself as North America’s market participants creates aberrations in first India-focused hedge fund. The firm the price of securities, and we use volatility was registered with the SEC in 2000 and as a friend.” manages the assets of a variety of private The fund, which was launched in August clients, principally family offices, funds of 2008, uses quantitative strategies such as funds, pension funds and endowments. pair trades, exchange-traded fund trading, Vik Mehrotra is the firm’s founder and and volatility trading, chief executive and is also portfolio manager and attempts to capture returns by targeting to the flagship Venus Relative Fund. Dylan the most liquid emerging markets, India,

Tinker is Venus Capital’s second portfolio Vik Mehrotra, founder and Brazil and Hong Kong. When appropriate, manager and trading strategist, who assists chief executive, Venus Capital Mehrotra will also engage in event trading. across all funds. The other members of the Fundamental and statistical inputs also help management team include trading strategist identify trading opportunities. Tajinder Singh, an ex-Fortis prop trader, Last year saw reasonable performance, and chief operating officer Vikas Chawla. A although the firm admits that making money number of analysts and traders make up the in the fund was tough. Liquidity tightened rest of the investment team. toward the end of the year in response to Currently, Venus manages four funds: the China raising its interest rates, but according Venus Relative Value Fund, an emerging to Mehrotra, the best opportunities came market-focused market neutral strategy, from large block trading and cross-country the Venus India Opportunities Fund, which relative value pairs. targets Indian small caps, the Venus Event In 2011, he believes the slow European Driven Fund and Venus Global Macro Fund, recovery could be an opportunistic time to both of which have a global mandate. increase exposure to European equities and The firm specialises in generating risk- believes US equities look far more attractive adjusted returns using niche strategies that than fixed income as a result of the second target emerging markets such as Brazil, India round of quantitative easing. The firm also and China, as well as pan-Asia. With the likes emerging market equities due to high Venus Relative Value Fund, Mehrotra uses Havell Rodrigues accepts GDP growth, despite inflationary pressures. the award for Best Relative systematic proprietary models to exploit short- Value Manager on behalf of Says Mehrotra: “In the near term, the term price differentials in emerging markets Venus Capital outlook for emerging markets looks cloudy as created by large institutional they face the threat of inflation block trades and behavioural and possibility of an economic inefficiencies. “Our niche slowdown, but the second strategies can deploy a limited half of the year will show that amount of money, and hence consumption remains strong are ignored by large hedge and governments should be funds and prop desks,” he says. able to navigate a soft landing.” Mehrotra is a seasoned On winning the award, veteran in trading emerging he adds: “It is an honour markets, having launched to be chosen by readers the first long-only India- of Hedgeweek as the Best focused fund in 1996. Asked Relative Value Fund. The how the alpha component trading and research team’s is generated in the Relative discipline is the key reason for Value Fund, which uses no this success.” n

Hedgeweek Awards Special Report Mar 2011 www.hedgeweek.com | 46 O v e r v i e w

44 the third straight month of outflows and the The findings of Deutsche’s survey of heaviest since January 2010. hedge fund investors echo the conclusions Since the crisis, fund of funds firms have of a study of institutional investors published had to find new arguments to attract investors by SEI earlier this year, which found that beyond their experience in picking managers, while they were bolstering their commitment which overall did not spare them from the to hedge funds, institutions expected greater losses suffered by the industry as a whole, transparency and solid risk management and their privileged access to managers, infrastructure from managers. which became less compelling when industry The report identifies a need for outflows prompted some of the best-known hedge fund managers to institutionalise managers to reopen their funds to investment transparency policies to attract new capital, and to contemplate hitherto scorned steps satisfy anxious investors, and protect their such as offering their strategies through reputations. Its responses from investors managed account platforms. indicated the importance of managers clearly Deutsche says the liquidity crisis of articulating how their investment strategies 2008, the Madoff fraud and an increasingly add value to investors’ portfolios, enabling sophisticated investor community resulted them to differentiate themselves through in heavy outflows from funds of funds, client service, reporting and education. especially in Europe, and raised questions SEI also found that institutional investors’ about the continuing validity of their business confidence in hedge funds was growing, model. According to the report, last year with 54 per cent of its survey respondents saw a bifurcation of the fund of funds world planning to increase target allocations in between a handful of mostly US firms that the course of 2011 – subject to concerns have been successful in raising new assets, about transparency and risk management. while the rest, particularly in Asia and Risk management infrastructure was the Europe, have struggled. second most important factor in hedge fund In response, the survey indicates, fund among investors surveyed with 75 per cent of funds firms have followed single hedge of respondents deeming it very important, fund managers in seeking to institutionalise second only to clarity of investment their investor base, focusing on longer- philosophy with 79 per cent. term institutional investors rather than high “The study confirms that investors are net worth individuals. For nearly 60 per committed to hedge funds, but managers cent of Deutsche’s fund of funds manager must get and keep investors comfortable respondents, institutional capital now with their investment decision,” says Phil constitutes 50 per cent or more of the total, Masterson, managing director for SEI’s whereas only 40 per cent of firms reported investment manager services division. this in 2008. “Managers must differentiate themselves Despite much talk about institutions through increased transparency, enhanced moving toward direct investment in single- risk management, and reporting as well as manager funds, the report concludes that better overall client service to gain and retain funds of funds’ efforts to attract more assets post-financial crisis and post-Madoff.” institutional capital have been largely SEI reported that 70 per cent of investing successful, and that there remains a place institutions polled highlighted lack of in the industry for funds of funds that offer transparency as their biggest worry, up from expert advice, due diligence resources, 56 per cent in 2009, and more than 75 per access to quality managers and bespoke or cent want risk analytics from managers, differentiated products. while 58 per cent named their While investors focus first and foremost biggest worry in hedge fund investing. Adds on returns, the survey suggests that fund of Masterson: “The hedge fund managers best fund managers can differentiate themselves equipped to compete will be those able to through a focus on niche managers, as articulate clearly their value proposition and well as bespoke mandates that can provide source of alpha, as well as demonstrate institutions with investment solutions tailored institutional-quality operations and risk in areas such as liquidity and comingling risk. management infrastructure.” n

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