Friday March 10, 2017

March 10, 2017

The Long and the Short: How Managers Are Playing Upcoming Elections Elections in the Netherlands next week will set the tone for upcoming ballots in France and in Germany that will determine whether the voter anger that prompted the U.K.’s Brexit decision and brought Donald Trump to the White House is reverberating across mainland Europe. Here we take a look out how managers are betting around this year's elections.

Tepper Is Long Europe Stocks, Short Bonds Europe Good Investment After 'Dust Settles' David Tepper, the founder of Appaloosa There's value to be found in European risk assets Management, is betting long on European stocks in the infrastructure, energy, defense and despite the political risks with the upcoming financial sectors, according to Algebris French election. Investments. "It’s a probability game in Europe," Tepper said "Strong macro data and a recovery in corporate March 8 in an interview on CNBC. Valuations fundamentals make Europe a good investment there are "much much lower" compared with the Source: Algebris after the political dust settles," Alberto Gallo, Source: U.S. He doesn’t expect French presidential partner and portfolio manager, wrote in his latest Bloomberg/ Andrew Harrer candidate Marine Le Pen, a staunch nationalist report, released March 8. who advocates that France leave the euro, to win He pointed to three catalysts that can reprice European the election, though its outcome remains a concern, he said. assets: Marine Le Pen losing in France, a normalization in — Simone Foxman and Vincent Bielski monetary policy and a post-election opening of Germany to fiscal stimulus. Northlight Sees Rally in Europe HY Debt "While the reflation scenario is very well priced in U.S. assets, we think Europe's positive case is still contrarian and Improving GDP growth in Europe and diminishing undervalued," he said via e-mail on March 8. "We express that political risk will lead to a rally in European high- through upside exposure to inflation and assets linked to fiscal yield debt and triple C-rated bonds, according to stimulus (infrastructure, defense) and higher interest rates Charles-Henri Lorthioir, partner and portfolio (financials), while we are hedged against a rise in interest rates." manager at Northlight Group. — Melissa Karsh "The beginning of Trump's presidency has been Source: a bit chaotic to say the least," Lorthioir said on a Northlight telephone call on Feb. 28. "Europeans have been Amplitude Sees More Countries Leaving EU following the U.S. very closely, and may be a bit Karsten Schroeder, CEO of $1.7 billion more cautious to empower some of these more populist figures. Amplitude Capital, said the euro zone was They're starting to realize that running a country is a bit more "flawed" from the beginning and has caused a lot complex if you're a populist." of challenges for the individual member states. Geert Wilders, the leader of the Party of Freedom in the "When you run one single currency, you have Netherlands, is "no longer highlighting Trump in his campaign," to have a strong European Parliament, you have Lorthioir said. If this sentiment continues, "political risk will Source: to have common policies, [and] common Bloomberg TV diminish significantly, leading to a broader rally for European risk understandings when it comes to fiscal policy, assets," he said. when it comes to employment markets, when it The bonds should also benefit from improving GDP growth in comes to the overall economic stimulation," Schroeder told Europe, which Lorthioir forecasts will reach 1.8 percent this year Bloomberg TV March 9. "I don't think we have that agreement in from 1.7 percent in 2016. Europe. ... It's a matter of time when the euro as a currency is The Northlight European Fundamental Credit Fund, a long- getting weaker and weaker and more countries are going to short fund focused on high-yield credit and leveraged loans, is leave the euro zone." up 1.4 percent in the first two months of the year after a 0.5 There's a decoupling between Europe and the U.S., according percent gain in February, according to an investor letter seen by to Schroeder. The divergence in interest-rates policy and price Bloomberg Briefs. movements in the equity markets provides a "more attractive — Suzy Waite environment," he said. — Melissa Karsh

Inside Lansdowne and Marshall Investor appetite for Western Numen starts a UCITS fund; RAM AI is long materials, Wace gained in Feb.: Returns Europe has fallen: Survey Millennium hires from Moore short consumer staples: Q&A

Returns in Brief Hedge Funds Europe March 10, 2017 2

Returns in Brief

Lansdowne Partners LP’s main February Returns hedge fund gained 4.6 percent in February, according to a performance update seen by Bloomberg Briefs. The $9 billion Lansdowne Developed Markets Fund has returned 1.6 percent so far this year, after losing almost 15 percent in 2016. A spokesman for the London- based firm declined to comment.

— Nishant Kumar and Melissa Karsh, with assistance from Saijel Kishan Marshall Wace LLP's MW Europa Fund is up 1.7 percent in its U.S. dollar share class in February, bringing year-to- date returns to 1 percent, according to a performance report seen by Bloomberg Briefs. The MW Global Opportunities Fund rose 1.8 percent in its U.S. dollar Year-to-Date Returns Through February share class last month and is up 5 percent this year, the report said. The firm didn't respond to an e-mail seeking comment. — Darshini Shah and Nishant Kumar Castellain Capital's Castellain Value Fund rose 1.4 percent in February to bring year-to-date returns to 3.6 percent, according to a performance report seen by Bloomberg Briefs. The 34 million- pound ($42 million) fund, which is managed by Castellain founder Robert Goldsmith, returned 17 percent last year. A fund spokesman declined to comment. — Darshini Shah Funds in the charts not mentioned in the accompanying text on this page were reported in other Asset Management’s issues of the Brief or in Bloomberg News stories. For questions, e-mail [email protected]. main hedge fund gained 2 percent last month to bring year-to-date returns to 0.5 after being notified of a phase 2 antitrust Och-Ziff Capital Management Group, percent, according to an investor letter review, detracted from performance. the $33.7 billion publicly traded hedge seen by Bloomberg News. The Brevan "After a relatively strong start to the year fund led by Dan Och, lost 0.2 percent Howard Master Fund managed $11 deal flow wise, this month was a bit of a last month in its OZ Europe Master Fund, billion in January. A spokesman for the disappointment as January’s deal flow according to public filings, dated March firm declined to comment. strength did not carry over into February," 2. The fund was up 1.8 percent in the according to commentary in the investor — Nishant Kumar first two months of the year, after gaining document. "While the spreads in many of 3.7 percent last year, the filing said. Oddo Meriten Asset Management's the newer deals remained too tight for — Melissa Karsh Orsay Merger Arbitrage Fund gained us, we found many investment about 1 percent in February, according to opportunities in some of the older RBR Capital Advisors AG's money an investor report seen by Bloomberg situations, which were volatile. This pool gained 4.6 percent in February, Briefs. The Paris-based fund was down allowed us to continue to manage the according to an investor letter seen by about 2 percent in the first two months of fund with a high leverage. We therefore Bloomberg News. An investment in GAM the year, after gaining 15 percent in continue to be optimistic on our ability to Holding AG contributed 1.85 percent to 2016, the report showed. Rite Aid Corp., deliver good performance for 2017." The the gains of RBR European Long Short Manitoba Telecom Services Inc. and fund has 274 million euros ($289 million) fund, the letter shows. The fund is down Actelion Ltd. had "notable" gains in the in assets. A spokesman for the firm 2 percent this year. A representative for month that benefited performance, the declined to comment. RBR confirmed the newsletter's contents. report said, while positions in Cabela's — Melissa Karsh and Nishant Kumar — Nishant Kumar Inc. and a small-cap stock, which sold off

Survey Says... Hedge Funds Europe March 10, 2017 3

Survey Says...

Investor Appetite for Western Europe Diminishes in 2017: Deustche Bank By Melissa Karsh North America Most Sought-After Investment Region Investor appetite for Western Europe has declined slightly this year, given uncertainties surrounding the U.K.'s Brexit plan, the forthcoming elections and an expected economic growth slowdown, according to a survey by Deutsche Bank. A net 17 percent of respondents said they would increase their exposure to the region, compared with 35 percent last year, when it was the most sought-after region, the survey released March 8 showed. North America was the most sought-after investment region this year. Deutsche Bank surveyed 460 investors with about $1.9 trillion under management or advisement. Other highlights of the survey were: Hedge fund clients predict withdrawals to the strategy. After the surprise report examining the survey results. from the industry will slow this year. outcomes of the U.S. election and the Fees are very much on investors’ Respondents forecast a net $1 billion Brexit vote in 2016, “the political road minds. Seventy-seven percent said they leaving the private partnerships in 2017. ahead appears equally, if not more, want managers to offer hurdle rates, and uncertain as policy makers globally Macro funds will be the biggest draw. 71 percent said management fees should diverge in their approach to spur On a net basis, 27 percent of the be reduced as assets grow. economic growth,” according to the investors said they were planning to add — With assistance from Katherine Burton bank's

Market Calls Hedge Funds Europe March 10, 2017 4

Market Calls

MSK Capital Is Bullish on NOS, Altice, Continental By Suzy Waite "particularly cheap" and the stakes aim to concerned by the growing reluctance by London-based MSK Capital Partners is "capture some of the potential upside the political class to make decisions that bullish on Portuguese television, cable from a market-friendly election outcome," can create a path to a resolution of and satellite broadcaster NOS SGPS, he said in an email on March 9. issues. A big reason for this is the Dutch cable service company Altice NV "We are really looking to the French increasing anti-EU sentiment of local and German tire and automotive election, which we see as much more electorates that is constraining politicians manufacturer Continental AG, according important than the Dutch election," from taking action." to Chief Investment Officer Makis Kaketsis said. MSK's fund gained 1.2 percent in Kaketsis. Long-term, there are many issues February and is up 2.6 percent so far this These companies are currently plaguing the continent however. "We are year.

Market Calls, Revisted

How Did Park Lane Family Office’s Bullish Bet on B2Holding Do? By Hema Parmar B2Holding Underperforms Oslo Stock Exchange Last March, Park Lane Family Office’s Henrik Stang Heffermehl was bullish on Oslo-based financial services provider B2Holding ASA. The company benefits from a stricter regulatory environment for banks in Europe, will probably see rapid earnings growth due to strong deal flow and is an attractive takeover target, portfolio manager Heffermehl said in an interview published on March 15, 2016. Since then, B2Holding has gained 9.3 percent, while the Oslo Stock Exchange Index rose 18.3 percent. Heffermehl said via e-mail March 9 that he’s still "very positive" on the the stock, and expects it to double in price within Click on chart for a live version or run G #HF.BRIEF 77 on the Bloomberg Terminal. two or three years. B2Holding is "dramatically undervalued," he said. "We are impressed with how management has executed on its strategy, with expansion to several new markets and heavy investment in NPL portfolios over the last year."

Fees Hedge Funds Europe March 10, 2017 5

Fees

Howard's New Fund Said to Seek 30% Performance Fee On the Move By Nishant Kumar Alan Howard is seeking 30 percent of the returns from his new hedge fund, exceeding Millennium Said to Hire the industry average and more than the main money pool run by his investment firm, according to people with knowledge of the matter. Ex-Moore Partner as PM The Brevan Howard AH Master Fund, overseen solely by him, plans to charge a 0.75 percent management fee, the people said. The average management fee is now 1.5 Bramen Singanayagam, a former percent, while the performance fee is 17.5 percent, according to Hedge Fund Research partner at Moore Capital Inc. A spokesman for Brevan Howard Asset Management declined to comment. Management LLC, has joined Howard’s new fund will cater to investors who want direct exposure to him and Millennium Management in London manage a mix of new, outside capital as well as money from the fund’s flagship fund, as a money manager, according to a people said last month. Howard, 53, is trying to revive the fortunes of his investment firm person with knowledge of the matter. after assets dropped to $15.5 billion at the end of 2016 from $40 billion at its peak. Singanayagam trades equities, said Howard’s new fund and fee structure ties him more to his fund’s returns and pits him the person. A spokeswoman for Millennium, Israel Englander’s $34.8 against former colleague Chris Rokos, who now manages about $7 billion for his own investment firm in London after quitting Brevan Howard in 2012. Rokos’s hedge fund billion investment firm, declined to charges similar fees in one of its share classes. comment. Singanayagam didn’t Critics of hedge funds ranging from Warren Buffett to college students claim the respond to calls and an email industry’s hefty fees are unjustified. Last year, investors pulled $111.6 billion from the $3 seeking comment. trillion industry, according to data from eVestment. Millennium hired Morgan Stanley’s Two of Brevan Howard’s funds stopped charging existing clients management fees on global head of equities trading, Peter new investments last year, a person said in September. The money pools earlier Santoro, people said last month. He charged a 2 percent management fee and a reduced rate for clients who tied their replaced Hyung Soon Lee, who left money up for longer. The firm still takes a 20 percent cut of profits. last year amid a restructuring of the hedge fund’s equities group. Singanayagam, who previously worked for Steve Cohen’s former Launch investment firm SAC Capital Advisors, joined Louis Bacon’s Moore Capital in 2014. He left the firm last Numen Starts UCITS Fund to Protect From Rising Rates year and started at Millennium earlier this month, according to records at By Melissa Karsh and Nishant Kumar the U.K. Financial Conduct Authority. Numen Capital is starting a daily liquidity UCITS hedge fund this month to protect — Nishant Kumar against a rising interest-rate environment. The Numen Bear Rates Fund will invest mainly in short liquid futures, including U.S. McCloskey Is President of Treasuries, German bunds, U.K. gilts, Japanese government bonds and French and Italian government bonds as well as select liquid credit indexes and options, according Man Americas to Abigail Cushing, head of investor relations at the London-based firm. Michelle McCloskey has been The UCITS fund — the firm's second — is designed to be profitable as interest rates appointed as president of Man rise, Cushing said via telephone on March 8. Americas, according to a press "There are several factors combining on a global scale to create an environment ripe release on March 9. to drive the reflation trade, which should result in a meaningful repricing in fixed-income "Michelle will work with the assets," she said. "We find that most investors are unprepared for any type of correction Americas sales team, under Eric in fixed income." Burl's leadership as Head of Man The short interest-rate fund will start trading with money from a seed investor as well Americas, to deepen Man’s as internal capital, said Cushing, who didn't specify further. relationships with investors in the It will be managed by Filippo Lanza, who also runs the firm's flagship Numen Credit Americas," the press release said. Opportunities Fund, which started in 2008. Lanza also manages the firm's credit- "She also remains President of FRM, focused multistrategy UCITS fund, which launched in 2012, Cushing said. Lanza where she will continue to work with manages about $900 million in total strategy assets. Keith Haydon, CIO, and Mike Turner, Lanza founded Numen in 2008. COO, in leading the business, which

is overseen by Man Group’s President, Jonathan Sorrell." — Darshini Shah Hedge Funds Europe March 10, 2017 6

Spotlight Hedge Funds Europe March 10, 2017 7

Spotlight

RAM Alternative Investments Equity Fund Is Short Consumer Staples, Long Materials

Thomas de Saint-Seine, CEO and Senior Equity Fund Manager, RAM AI The fund has returned 1.4 percent in the first two months of this year. Quant funds offer "a good alternative" to the beta ETF industry. Interviewed by Darshini Shah on Feb. 22 and March 6. Comments have been edited and condensed for clarity.

Q: Tell me about RAM Active position in consumer staples, while favor of ETFs, crowding effects on ETFs Investments. increasing its long bet in materials. have become more visible. A: RAM AI was founded in 2007. We use Geographically, we have tapered our net the latest technology to systematically long position on the U.K., while allocating Q: Quants were the only strategy last carry out fundamental stock selection more capital net long in Germany and year to see inflows, as the hedge fund across an enormous equity universe. Our Denmark. Overall, long positions in industry saw the most outflows since investment process is always bottom-up. Nordic countries have been increased. 2009. Are you doing anything to We lead with the fundamentals of a stock capitalize on this popularity? to generate a highly-diversified portfolio. Q: What situations are you looking out A: Quant investment has become By using technology to guide our equity for this year and how are you hoping increasingly popular with more and analysis, our investment process is to capitalize on that? bigger players within the market. The purely objective, eliminating inherent A: We expect, and hope, this to be the most popular strategies based on selection biases. Our funds deploy an year for the discretionary stock-picker. traditional factors — smart beta — imply equal split of defensive, momentum and Markets look as though they will remain more volatility or crowding effects and value sub-strategies that, when favorable to companies’ fundamentals lower excess return as markets are more combined, can help to insulate investors and, over the next few months, European arbitrated than before. against cycle risk and enhance returns. equity markets look ready to revert to this Subsequently, quant managers have fundamental logic. had to develop new strategies and to Q: Let’s talk about the long-short With elections in France and Germany take advantage of new sources of European equities fund. How did the and Donald Trump reaching a record of inefficiencies. Quant research is fund perform this year and in 2016? unpopularity, political uncertainties are fundamental to maintain its edge, and A: I manage that fund alongside creating volatility in markets. This means increase the de-correlated sources of Emmanuel Hauptmann and Maxime the high diversification wedded to our returns. New technologies offer plenty of Botti. The fund is up 1.4 percent this year long-short beta-neutral approach could new possibilities for the smarter quant through February. In 2016, it was down 4 be important in helping mitigate potential firms. We believe that quants will percent. Markets in 2016 were not upcoming turbulence. continue to grow in the future as they conducive to either a beta-neutral After a few years of strong inflows in offer a good alternative to the beta ETF approach, nor investment based on industry. fundamental logic. Funds that outperformed benefited from investments in value low-quality stocks and event- At a Glance driven strategies. Since inception in December 2011, our fund has delivered Age: 44 annualized returns of 7.1 percent. As of Residence: Geneva, Switzerland Feb. 8, the fund’s AUM stood at 579 Professional background: Credit Agricole, Reyl Group, RAM Active Investments million euros ($611 million). Education: University of Paris X, NEOMA Business School Favorite city: Gstaad in the middle of the Swiss Oberland Q: How is the portfolio currently Recommended book: "The Royal Game" by Stefan Zweig positioned? Hobbies: Music, skiing, pilates, mountain trekking, wines A: The fund has taken a new net short Who would you love to have dinner with (living or dead): David Bowie

Calendar Hedge Funds Europe March 10, 2017 8

Calendar

To submit an event e-mail [email protected]. The "event" column links to websites. "Attendees of note" links to individual's BIO page, where available, on the Bloomberg terminal.

DATE ORGANIZER EVENT SPEAKERS/ATTENDEES OF NOTE LOCATION Private Wealth Switzerland Maximilian Kunkel, UBS; Gilles Prince, Banque Privee Edmond de Rothschild; Jan March 15 Markets Group Geneva Forum Van Bueren, Union Bancaire Privee; Jay Oberai, Synergy Asset Management. The Summit for Asset Leon Kamhi, Hermes; Chrystelle Charles-Barral, Neuberger Berman; Stephen March 15 TSAM London Management O'Donoghue, AIG. Per Wimmer, Wimmer Family Office; Josh Matthews, MASECO Private Wealth; March 21 Markets Group Private Wealth UK Forum London Christian Armbruester, Blue Family Office. March 27- Battle of the Holger Knauer, Catana Capital; Peter Hafez, RavenPack; Matthew Sandretto, Battle of the Quants Frankfurt Frankfurt 28 Quants Worldwide Greyfeather Capital. Daniel Johnson, SS&C; Paul Spendiff, Apex Fund Services; Andrew Welch, ACA March 28 Bloomberg Hedge Fund Start-up Conference London Compliance; Kevin Loprimo, Cowen; Martin Cornish, MJ Hudson. Global Policy & Regulatory Heather Smith, Cayman Islands Monetary Authority; Steven Maijoor, ESMA; April 4 AIMA Paris Forum 2017 Elena Manola-Bonthond, CERN Pension Fund. Distributing & Marketing Dominique Sekyra, Knight Vinke; Matthieu Lucchesi, AMF; Edward Morse, Tages April 25 informa Alternative Investment Funds in London Capital; Akram Yosri, 3iC Group. Europe 2017 Alison Hollingshead, Man Group; Tom Ungi, Millennium; Erik Koenig, GLG April 25-26 WBR TradeTech Europe 2017 Paris Partners; Ed Wicks, L&G Investments; Christian Morgenstern, . May 7-9 Context Summits Context Summits Europe 2017 One-on-one meetings. Barcelona Zoltan Eisler, Capital Fund Management; Gregory Pelts, BlackRock; Global Derivatives Trading & May 8-12 informa Grigorios Papamanousakis, Aberdeen; Andrea Alberto Castaldi, Whitehaven Barcelona Risk Management Trading. May 9-10 Prestel & Partner Family Office Forum To be released. Germany Massimo Ruggieri, Elliott Advisors; Natalia Joubrina, CarVal; Massimo Massimilla, May 9-10 SmithNovak NPL Europe 2017 London Algebris; Stefano Questa, TPG; Anne Frohling, ECB; Nick Smith, Bank of Cyprus. Hedge Fund Emerging Manager Ben Cossey, Stable Asset Management; Tushar Patel, HFIM; Rozenn Peres, New May 10 informa London and Startup Forum Alpha Asset Management. European Pensions & May 15-17 marcus evans To be released. Switzerland Investments Summit 2017 Laurent Ramsey, Pictet; Allan Polack, PFA; Nicolas Moussavi, Lyxor; Luke Ellis, June 12- informa FundForum International Man Group; Salvatore Cordaro, Tages Capital; Mike Collins, PGIM; Fiona Frick, Berlin 14 Unigestion. DISCLAIMER: The information on this page was compiled by Bloomberg from multiple sources, public and private, and is deemed to be accurate, but not definitive or exhaustive. Questions about events should be addressed to the event organizer.

Bloomberg Briefs: Hedge Funds Europe

Bloomberg Brief Managing Editor Contributing Editor Marketing & Partnership Director Paul Smith Nathaniel E. Baker Courtney Martens [email protected] [email protected] [email protected] +1-212-617-2447 Hedge Funds Editors Contributing Reporters

Melissa Karsh Hema Parmar Advertising [email protected] [email protected] Lucy Rosen [email protected] Darshini Shah Suzy Waite +1-212-617-6759 [email protected] [email protected] Interested in learning more about Reprints & Permissions the Bloomberg terminal? Request a Bloomberg News Managing Nishant Kumar Lori Husted free demo here. Editor [email protected] [email protected] Elisa Martinuzzi +1-717-505-9701 x2204 [email protected]

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