Opalesque New Managers March 2012

ISSUE 03 March 2012
Opalesques Emerging Manager Monitor
ISSUE 01 March 2012 ISSUE 03 September 2011
2 EdiTOriAL 3 EMAnAgErs indicEs February 2012 performance of Opalesques indices of emerging

manager funds
19 Q&A A researchers view on what investors want from emerging

managers
23 LAunchEsmaiden launches in late February and A recapitulation of

early March
5 NEw FUNdS IN ThE dATAbASE 6 EMErging MAnAgErs: sTATisTics Peter Urbanis quantitative analysis of emerging managers
performance
ViEw 25 ThE AnALyTicALbenefits of investing in new Several analysts explain the

managers and criticise the trend of investing in well-known names.
13 FOcUS of hedge funds that invest in emerging managers A look at funds
28 PErsPEcTiVEs managers in the last 30 days. Opinions voiced on emerging 29 PrOFIlEShedge fund managers speak to Opalesque Three emerging
New Managers | Opalesques Emerging Manager Monitor
Editorial
welcome to the March 2012 issue of New Managers, Opalesques monthly monitor of emerging hedge fund managers. in Statistics, Peter Urbani demonstrates that the Opalesque Emanagers Index (February results on page 3) is highly suitable Benedicte Gravrand as a benchmark, because it can be easily replicated with a low tracking error. he goes on to highlight some of the main contributors to the recreated Indexs risk and return characteristics through a risk decomposition. The view that it might be best to leave the emerging manager selection, checking and monitoring to a specialist, such as a fund of funds or a multi-manager programme for example, came to us from different corners this month. lisa Fridman of PAAMcO and william benjamin of hSbc, both part of a FoF management team, talk to Opalesque about their preferences and procedures, while we look at the latest citi Finance report on early investors in detail in Focus. hedge fund research expert Katherine hill tells Opalesque what investors really look for in emerging managers in Q&A. Several analysts recommend bucking the trend of investing in well-known names and instead investing in multi-manager programmes of emerging managers, as there are good chances that the latter might provide outperformance in their early years in The Analytical View. in Profiles, meet the managers of Acacias long/short equity fund, coherences future fixed income hedge fund, and Noblesse Obliges forex managed account. I hope you enjoy our third issue of New Managers. Please, do contact me if you have any related news. Benedicte Gravrand Editor gravrand@opalesque.com
ISSUE 03 March 2012
Opalesque New Manager is edited by Benedicte Gravrand. based in Geneva, Switzerland, benedicte also writes exclusive stories, special reports, co-edits Opalesques daily hedge fund publication Alternative Market briefing (AMb) and occasionally moderates Opalesque roundtables. benedicte is perfectly bilingual (French/English) and has lived in Paris, Geneva and london. She obtained a bA (honours) in Philosophy from the University of london, worked in the publishing sector, the hedge fund industry and then joined Opalesque in 2007.
Peter Urbani is the former cIO of Infiniti capital, a now defunct hong Kongbased Fund of Funds group. Prior to that, he was head of Quantitative research for Infiniti, head of Investment Strategy, head of Portfolio Management, head of research and Senior Portfolio Manager for number of buy-side firms. he started out in stock-broking as an open outcry floor trader in the late 1980s. Some of his VbA code was included in Kevin dowds Measuring Market risk and he specialises in risk Management and Portfolio construction.
Emanagers Indices
Emanagers Total Index up 1.66% in February (+3.64% YTD)
Opalesque ltd., a leading provider of online information services to the alternative investment industry, today announced the estimated February 2012 and year-to-date results for its series of indices tracking emerging hedge fund and managed futures fund managers. Index calculations are based on currently 288 funds listed in Opalesque Solutions Emanagers database, the industrys only database dedicated exclusively to fund management firms less than 48 months old and with assets under management of less than $600 million at the time of the firms inception. The Emanagers Total Index, tracking both hedge funds and managed futures funds, gained 1.66% in February, resulting in a compounded 2012 return of 3.64%. Since inception in January 2009, the index grew over 62% and outperformed both the global stock market and its hedge fund peers.
ISSUE 03 March 2012
February performance was driven by hedge fund strategies, many of which profited from the equity market rally in the first two months of the year. As a result, the Total Index is close to recovering from the losses experienced in the second half of 2011. Over the last twelve months, it gained 0.70%, compared to a 1 percent loss for the Eurekahedge hedge Fund Index. According to our first estimation, the Emanagers hedge Fund Index gained 2.34% in February and 5.63% in the years first two months. On the other hand, managed futures funds tracked by the Emanagers cTA Index gained only 0.16% in February and have yet to recover from their January loss (-0.64% YTd).
Emanagers Indices
ISSUE 03 March 2012
A comparison of all indices shows that emerging managers outperformed their established peers over the last twelve months. however, emerging managed futures managers lagged behind the total cTA group represented by the Newedge cTA Index this year so far.
Performance (in %), Volatility and Equity Market Beta (in %)

Index Emanagers Total Index Emanagers Hedge Fund Index Emanagers CTA Index Feb 2012 1.66 2.34 0.16 YTD 3.64 5.63 -0.64 12m 0.70 0.24 -0.74 2011 -1.59 -2.83 0.51 2010 18.73 17.07 19.15 2009 34.51 37.59 20.52 Volatility 6.33 9.48 3.73 Beta (bm=MSCI) 32 49 -1
Eurekahedge Hedge Fund Index Newedge CTA Index MSCI World
2.05 0.87 4.66
4.36 1.46 9.82
-1.00 -2.88 -3.91
-3.97 -4.52 -7.61
10.72 9.26 9.40
20.40 -4.31 27.07
6.11 8.42 18.66
30 -1.8 100
- Florian Guldner, Opalesque research
New Funds in the database

New funds in Opalesque Solutions Emerging Managers database
(second half of February and first half of March 2012)
Fund name Vasken Macro Multi-Strategy Fund Ltd (EUR) Pulse Genesis Fund Consumer Metrics, L.P. Carilliam Global Fund, LP NCM Holdings Evergreen Australian Equities Return Fund Gulfmena Access Fund (Class A) Gulfmena Opportunities Fund Limited (Class A) Gulfmena Opportunities Fund Limited (Class B) LCA 30 Strategy Global Macro / Multi-Strategy Fund of Funds directional Equity long/Short directional Equity long/Short directional Equity long/Short directional Equity long/Short Equity market neutral directional Equity long bias directional Equity long bias cTA / commodity Manager Location lausanne, Switzerland New York city, USA Marshfield, MA, USA brentwood, TN, USA Stamford, cT, USA Melbourne, Australia dubai, UAE dubai, UAE dubai, UAE chicago, Il, USA Current Fund AuM 19m $38m $9.6m $45.5M $21m A$61m $7.58m $23m as above $0.12m
ISSUE 03 March 2012
Launch date Mar-11 dec-11 Jan-09 Sep-11 May-10 May-10 Jun-11 Jan-10 Feb-10 Sep-10
The Opalesque Solutions Emerging Managers database is an extremely niche and specialised database of Emerging hedge Fund Managers, and access is available for eligible investors such as Funds of Funds, Family Offices, Pension Funds and UhNwI globally as well as academia and research analysts.
For the sake of this database, we define an asset manager as emerging manager if, 1) The firm is less than 48 months old and 2) The AUM of the firm at the time of the firms inception is less than $600 million. If you want your fund to be in the Emerging Managers database, please send your details to: db@opalesque.com.
Emerging Managers: Statistics

One of the recommendations of The Association for Investment Management and research (AIMr), now part of the cFA Institute, with respect to its guidelines for benchmarks is that they be replicable. with this in mind, we this month attempt to recreate the Emanagers index using the Opalesque Emerging Managers database. The Peter Urbani Index is equally weighted with notional new money pro-rated to new funds as they enter the index. based on the available underlying data and bearing in mind that the index is retroactively updated each month, we were able to recreate the index returns with a tracking error of 3.33% or -33 basis points per annum to the actual index compound annual return (cAGr) of +16.55%. we then performed a four moment risk and return attribution analysis, which incorporates the effects of the higher order moments ( skewness and Kurtosis ) via the calculation of co-skewness and co-kurtosis matrices, on the ex post performance of the Index portfolio. Extrapolating the cone of uncertainty into the future based on the underlying statistics of this calculation suggests an expected return of +9.96% over the next 12 months. Two caveats here are obviously that this is based entirely on past
ISSUE 03 March 2012
Opalesque Emanagers Index easily replicable with relatively low tracking error
performance and utilises the four-moment cornish Fisher modification to the Normal distribution which has some inherent problems outlined in issue one of the Emerging Managers Monitor. A further comment is that the forecast return has most likely been biased downwards by the lower returns seen in 2011.

Emanagers Total Index and Index Recreation
170 160 150 140 130 120 110 100 90 80
Actual Recreated
ISSUE 03 March 2012
160 150 140 130 120 110 100 90 80 70 60
Emanagers Forecast Returns ( Modified Normal )
0.001 0.01 0.05 109.96 0.25 0.5 0.75 0.95 0.99 0.999
Feb-10
Aug-10
Feb-11
Aug-11
Feb-12
Aug-12
Feb-13
Aug-13
Feb-14
Emerging Managers: Statistics Four moment risk and return decomposition of Emanagers Index
ISSUE 03 March 2012
Four moment risk and return decomposition of Emanagers Index
Of the 288 Emerging Manager funds currently in the Opalesque Emanagers database, 194 Funds are currently in either the Emanagers hedge Fund Index Ofor Emanagers cTA Index. Given thefunds currentlycollection the current month estimateDatabase, 194 Funds are currentlyfor either theAll the 288 Emerging Manager vagaries of data in the Opalesque Emanagers of +1.66% is based on the available data in 122 Funds. analyses are based Fund Index and a confidence level of 95%. Emanagers Hedgeon these funds or Emanagers CTA Index. Given the vagaries of data collection the current month estimate of +1.66%
is based on the available data for 122 Funds. All analyses are based on these funds and a confidence level of 95%.
40.1% divided by the weighting of 31.1% is 1.29. This suggests that although the CTAs in the portfolio have better single period risk measures they Opalesques Emerging Manager Monitor New Managers | have had more significant multiple period drawdowns over the analysis period. This is supported by the lower 8 percentage contribution to the mean and suggests that the relatively lower weighting to CTAs is perhaps warranted.
As can be seen from the above table the 38 cTA Funds made up just over 31% of the Emanagers Total Index and contributed just under 24% towards Asthe mean monthly return. Although the cTAsthe 38the Index contributed less just over 31% of the Emanagers Total Index and0.76 they also just can be seen from the above table within CTA Funds made up to the mean than their weight as indicated by the ratio of contributed contributed less thanthe mean monthly return. Although the CTAs within Portfolio Skewness 12.6% and cVar ( Modified )than theirratio or as under 24% towards their weight to the overall portfolios Standard deviation 6.9%, the Index contributed less to the mean 3.9%. The weight percentage contribution of 0.76 they historic drawdown at risk (dar)* of 40.1% divided by overall portfolios Standard Deviation 6.9%, Portfolio indicated by the ratio of cTAs to the also contributed less than their weight to thethe weighting of 31.1% is 1.29. This suggests that although the cTAs12.6% portfolio have ( Modified ) period risk measures percentage contribution of CTAs to the Historic Drawdown at Risk (DaR)* of Skewness in the and CVaR better single 3.9%. The ratio or they have had more significant multiple period drawdowns over the analysis period. This is supported by the lower percentage contribution to the mean and suggests that the relatively lower weighting to cTAs is perhaps warranted.
Four moment risk and return decomposition Four moment risk and return decomposition of selected funds of selected funds
ISSUE 03 March 2012
The above table shows the percentage contribution of 29 selected funds representing some of the best and worst funds in each of the cTA and hF The above table shows the percentage contribution of 29 selected funds the disproportionate of the best and worst funds in each sub-indices. They collectively total just under 25% of the Total portfolio weight. Note representing some42.8% of drawdown at risk indicating the of the CTA and HF sub-indices. They collectively total just under 25% of the Total portfolio weight. Note the disproportionate 42.8% of asymmetric downside impact of the bad funds.
Drawdown at Risk indicating the asymmetric downside impact of the bad funds.
Graphical representation of selected statistics and funds Emerging Managers: Statistics

Four moment risk and return decomposition of selected funds
% Contribution to Modified Standard Deviation and Mean
10.0% 5.0%
% Contribution to Mean
T2 Associates Contrary #1 Pool Gator Financial Infinium Global Fund Kerrisdale Capital Partners, LLC Partners LP AM Capital AFB FortyEighters Opportunity Fund I, Gold Option LLC Program Bernett Diversified Global Fund, L.P. Clinamen Financial Volatility Arbitrage Fund
ISSUE 03 March 2012
Value contribution towards Excess Skewness and Kurtosis

1.0% 0.8% 0.6%
Excess Kurtosis
Bernett Diversified Global Fund, L.P. AM Capital Opportunity Fund I, Magister Ludi Global LLC Macro Fund Limited Noblesse Oblige Proprietary Account Arcane Index Fund
0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -6.0% -4.0%
0.4% 0.2% 0.0% -0.2%
K & Q Option Select Proprietary Program T2 Associates Contrary #1 Pool
Arcane Index Fund
-0.4% -0.6%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
-8.0%
-6.0%
-4.0%
-2.0%
Excess Skew
0.0%
2.0%
4.0%
% Contribution to Modified Standard Deviation
Modified CVaR and Mean

0.1%
Gator Financial Partners, LLC Bernett Diversified Global Fund, L.P.
% Contribution to Drawdown at Risk and Liquidity VaR

25.0%
Arcane Index Fund
0.1%
Kerrisdale Capital Partners LP Infinium Global Fund T2 Associates Contrary #1 Pool
20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%

Magister Ludi Global Macro Fund Limited APAC APEMM Fund Vista Index Plus Program Vanguard Axis Managed Currency Series Infinium Global Fund AFB FortyEighters Gold II Program T2 Associates Contrary #1 Pool
0.0%
Mean
-0.1%
LCA 30 Clinamen Financial Volatility Arbitrage Fund
% Cont. to Liquidity VaR
Bernett Diversified Global Fund, L.P.
Noblesse Oblige Proprietary Account K & Q Option Select Proprietary Program
-0.1%
-0.2%
Arcane Index Fund
-0.2% -0.4% -0.3% -0.2% -0.1% 0.0% 0.1% 0.2% 0.3%

Modified CVaR
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
% Contribution to Draw dow n at Risk
10

Graphical representation of fund CVaR (modified) to weight
ISSUE 03 March 2012
The below chart illustrates the ratio of the percentage contribution to cVar ( Modified ) divided by the weighting of each of the respective funds in the sample. For example the 8.94% contribution to portfolio cVar of -3.42% by the Arcane Index fund divided by its weighting of 0.82% gives a ratio of 10.9. Similarly the -5.32% contribution to portfolio cVar by the T2 Associates contrary #1 Pool divided by its weight of 0.82% gives a ratio of -6.49.
12.00 10.00 8.00 6.00 4.00 2.00 0.00 -2.00 -4.00 -6.00 -8.00
l o o P 1 # y r a r t n o C s e t a i c o s s A 2 T d n u F C L L s r e n t r a P t n e m t s e v n I e l g n A d n u F l a b o l G m u i n i f n I s e i r e S y c n e r r u C d e g a n a M s i x A d r a u g n a V d n u F s e r u t u F t s e v n I d l o G e h T
Ratio ( % Contribution to Modified CVaR / Fund Weight )
m a r g o r P y r a t e i r p o r P t c e l e S n o i t p O Q & K
) R U E ( P S d n u F o g l A h p l A
d n u F d e i f i s r e v i D l a b o l G P A C H
g n i d a r T y t i d o m m o C m d a n r a g r x o e P d n I e v i t a l u c e p S F E
m a r g o r P s u l P a m g i S l a b o l G
m a r g o r P s e r u t u F d e g a n a M m r e T t r o h S o s s o r e t n o M
m a r g o r P I I d l o G s r e t h g i E y t r o F B F A
P L , d n u F s n o i t a u t i S l a i c e p S l a b a S
P L s r e n t r a P l a t i p a C e l a d s i r r e K
C L L l a t i p a C c o l a l T
0 3 A C L
d n u F o r c a M l a b o l G d r a l l o C e h T
m a r g o r P s u l P x e d n I a t s i V
d n u F S T I C U n o i t u l o v E x e t r e V
l i a t e R d n u F S T I C U e n i l y k S
C L L , s r e n t r a P l a i c n a n i F r o t a G
d n u F e g a r t i b r A y t i l i t a l o V l a i c n a n i F n e m a n i l C
t n u o c c A y r a t e i r p o r P e g i l b O e s s e l b o N
m a r g o r P n o i t p O d l o G s r e t h g i E y t r o F B F A
d n u F M M E P A C A P A
d e t i m i L d n u F o r c a M l a b o l G i d u L r e t s i g a M
C L L , I d n u F y t i n u t r o p p O l a t i p a C M A
. P . L , d n u F l a b o l G d e i f i s r e v i D t t e n r e B
d n u F x e d n I e n a c r A
*Note: The drawdown at risk (dar) figure used in the analysis represents the weighted linear combination of all funds worst maximum drawdowns on the assumption that all funds experience their worst drawdowns simultaneously and with no diversification benefit, i.e. all correlations equal to 1.00. As such it represents a fairly extreme loss scenario similar in magnitude to that seen in 1987, 1998 and 2008. New Managers | Opalesques Emerging Manager Monitor
11
Interactive screening tool sorted by M2 Interactive screening tool with funds with funds sorted by M2
ISSUE 03 March 2012
12
Focus
One place emerging managers can be sure of being welcomed are funds of funds, at least those that tend to invest in them. Specialist funds of funds who actively support emerging managers offer a safe haven. They share their entrepreneurial stance: they see potential in start-ups. And at the same time, they are well equipped better than a lot of institutions for example - to do thorough checks and to assess the risks. To determine key trends in early stage investing since 2008, citi Prime Finance, a prime brokerage and capital introduction firm and a subsidiary of the bank citi, interviewed 90 firms: investors who are active in that space and recently launched managers. This resulted in a useful report for emerging managers, called day One and Early Stage Investor Allocations to hedge Funds. The majority of day 1/Early Stage (d1/ES) investors surveyed by citi are funds of hedge funds (FoF) around 70%. One of the reasons for this is that FoF are the biggest investors in start-ups. Their capital is dedicated to investing in hedge funds and must be fully invested at all times, unlike other investors, institutional or private, who tend to invest across other asset classes too. FoF also have bigger due diligence (dd) teams, are better positioned to know of managers launching new funds, and are not constrained by rigid concentration limits that restrict the percentage of a new managers assets under management (AuM) they can represent. Furthermore, institutional investors tend to go to FoF if they want exposure to emerging managers instead of making a direct investment. Opalesque interviewed two FoFs who invest in emerging managers to get their side of the story.
ISSUE 03 March 2012
Funds of funds and emerging managers: a mutually beneficial partnership

Betting on early performance
The main reason why investors chose to invest in emerging managers, citi says, is the belief that the latter perform best in their early years. we believe the early years are the best performing years for a hedge fund because they have no conflicts of trying to run a business and are fully focused on maximizing performance, a large institutional FoF told citi. Another said years 2 to 5 are usually the best, and another that investing early allows returns to be undiluted by other investors. Pacific Alternative Asset Management company (PAAMcO), an institutional FoF investment firm with offices in the US, london and Singapore, invests in d1/ES funds and believes that funds tend to outperform in the first couple of years of their existence; the firm has no specific restrictions with regards to AuM or track-record for underlying managers, and has been investing in emerging funds since its very beginnings. Lisa Fridman we dont limit our investment universe just to emerging funds but we tend to focus on that space, lisa Fridman, the head of European research at PAAMcO, told Opalesque.
13
Focus
hSbc Alternative Investments limited (hAIl), a division of hSbc Private bank, launched the hSbc Next Generation Fund in September 2011, a FoF that invests in new and upcoming hedge fund managers globally. This FoF also bets on evidence that emerging funds returns can be at their highest in the initial years. but, william benjamin, Global head of hedge Fund research at hAIl, told Opalesque, they will come usually with a commensurate high volatility, and there is a higher attrition rate of William Benjamin various funds which fail. So, you need to have a very strong operational due diligence platform, and very good understanding of that side of the business and not just the investment piece. benjamin is. large FoF told citi.
ISSUE 03 March 2012
Investing in emerging managers indeed means being in a strong negotiating position. It may be easier to negotiate specific terms for investors who are focused on long-term investing and can allocate in size, said lisa Fridman. There are a number of things we look to get for our investments; it could include fee reduction, a particular fund structure, transparency.
Concessions
The most sought after concessions are reduced management fees, followed by reduced performance fees. The base expectation for a new manager should be a 1.5% management fee and 15% performance fee. The survey should not be extrapolated to support a reduced fee trend for the industry as a whole, the report warns, as the discounts sought by investors are directly related to the incremental business and operational risk they assume with a new manager. hSbc has managed to negotiate lower fees both management and performance across all of the funds within the pool, thus benefiting investors in the FoF directly. The next largest concession investors ask for is increased access to managers, which implies increased transparency. They may also want future capacity (although apparently, the likelihood that a d1/ES allocation will transition into a core position for the investors portfolio is less than 50%). Preferential terms are generally memorialised in side letters, and overall, early investor concessions should be thoughtfully structured, citi stresses. 14
Other benefits: capacity, concessions

There is also the desire to lock in capacity early with managers who have a strong history of investment and high potential, as an anchor investor is better positioned to access additional capacity. Another rationale for investing early is being able to forge a relationship with a manager, and thus gain concessions and have greater access to him or her. Our firm wants to establish a good working relationship with managers and secure additional capacity so investing early allows us to get closer to the manager. we also want to invest when the managers are most nimble and aggressive with performance and not living off the management fees, a
Focus
Approaches and sourcing
citi classifies d1/ES investors into two main categories: those that have dedicated emerging manager programs and those that view the landscape opportunistically. 73% of those surveyed are opportunistic and 27% have a dedicated program, i.e. they have a captive pool of capital to allocate to start-ups, maybe also dedicated research resources to identify managers and perform dd. As for opportunistic investors, citi says that the potential capital in that section is so broad that it is hard to define an absolute size of the universe of investors considering new managers. PAAMcO is among those with an opportunistic approach, while hSbc is a dedicated program. The former sources its emerging managers by using sector specialists but also existing underlying managers may recommend their peers looking to start a fund. Emerging managers can also be sourced from broader networks, such as professional organisations, like the cFA Institute, 100 women in hedge Funds, cAIA (of whose board of directors PAAMcOs cEO Jane buchan is now the chair person). The more traditional route would be cap-intro teams Fridman added. cap-intro teams are usually run by prime brokers, and can be a major route for new funds. Also, various traders that we have met across the industry while they were working for large organisations may be looking to set up and contact us. Sometimes we get unsolicited emails about new funds. we try to make it known to the industry that we invest early, and that we dont take equity share which is something managers may prefer. hSbc launched its Next Generation Fund because of the number of exciting hedge fund launches around: we could see them in the pipelines from prime brokers and other sources that we use to identify new funds, benjamin said.
ISSUE 03 March 2012
Timing
The timing of d1/ES investments varies by region: US investors either favour the first 3 months after launch, or prefer a wait-and-see approach and invest in months 9-12. EMEA and APAc investors prefer to invest during months 3-9 after launch.
Large teams
d1/ES investors usually have large and experienced teams. having an experienced team able to gauge the likely success of a new or emerging manager is a skill set that seems to belong primarily in more mature organisations, notes the citi report. Institutional investors who do direct investments tend to have teams of 1 to 4, whereas citis surveyed firms typically have around 12 investment and research professionals. It is all necessary in order to conduct proper due diligence, something that cannot be overlooked when it comes to investing in start-ups. hSbc employs a very vigorous dd process, for all potential underlying funds for all of their portfolios. with the smaller funds, there is a large amount of emphasis on the operational side understanding the fund set-up, benjamin explains. Then we work very closely and we are in dialogue with the people setting the funds up very early. we have been able to work with them as they have gone through the process of structuring their hedge fund and their businesses to make sure that they are structured appropriately. It is a very thorough and it is a pretty long process that really walks them through from their conceptual stage to launch and, if we are happy with that and interested we will invest with them at that point.
15
Focus
Investments 2009-2011
The investors surveyed by citi made total d1/ES investments from 2009 to 2011 of $12.4bn in 779 investments (the majority of which were in the US: $8.5bn in 435 investments). One private pension fund told citi that they review 150 managers each year, but only allocated to two in 2010. A large FoF said 3 or 4 quality new managers per year would be sufficient for our portfolio. $5.6bn of the $12.4bn went into 352 investments in 2011 alone. On average, investors made 2.2 d1/ES investments in 2011 and 5 in the last 3 years. US investors averaged 2.6 in 2011. citi notes that a factor for the pick-up in activity last year was the exodus of sell-side proprietary desk traders, who left their firms to launch their own hedge funds ahead of the Volcker rule. As a reminder, the Volcker rule is a section of the doddFrank wall Street reform and consumer Protection Act. Proposed following the financial crisis of 2008, it separates investment banking, private equity and proprietary trading (hedge fund) sections of financial institutions from their consumer lending arms. It is meant to be implemented as a part of doddFrank on July 21, 2012 although there may be delays.
ISSUE 03 March 2012
Globally, the initial ticket size for d1/ES investments awarded from 20092011 was $16m, compared with $37.7m for established managers.
Factors that are considered

Factors assessed by investors when considering investing in new managers include the launch size (even if it is generally smaller these days), and that is especially important to US investors. The average size of managers receiving allocations over the past 3 years was $193m, says citi. Investors also prefer that founders eat their own cooking, with significant investment in their funds. before 2008, seeders were seen as capital providers of last resort, but perceptions have changed since, as d1/ES investor flows have dwindled. having the support of a prominent seeder can now be seen as a vote of confidence and a sign that the manager is institutionally credible, the report notes. Seeders provide the initial capital used to start a business. hSbc and PAAMcO are not seeders. Investors also cited the history, profile and stability of the investment team as a most important factor, with experience and performance track record as the most crucial elements. Infrastructure is also an important criterion. Ex-prop desk managers need more of an education to understand that they should not try to do it alone. If they launch with a senior cOO to manage the business aspects of the firm they will greatly improve their chances of success, a large FoF told citi. Prospective d1/ES investors focused an unexpected amount of time regarding the fact that we were launching with a part-time cOO, said a hedge fund manager who launched in 2010. 16
Ticket size
Ticket sizes are smaller nowadays and harder to get; so managers should be ready for more meetings but fewer allocations. citi cites heavier regulations, low average hedge fund performance in 2011, and limited amount of early stage capital as factors that will throw new managers into a much more competitive arena.
Focus
The investment strategy is a vital factor for PAAMcO. The investment side is really driving the initial decision as to whether or not to do more thorough holistic due diligence, lisa Fridman noted. If that test is passed, then a formal due diligence team will assess the manager from an operational stand-point. These two aspects investment and operations are very important; some of the managers setting up new hedge funds have an excellent investment strategy that they have been trading for a number of years, but they have not necessarily run a business. They may not have thought about the complexities of running a small business, motivating a team, going through the growing pains, aligning interests with investors, and so forth. There are indeed a significant number of funds that fail due to operational mismanagement in their early days. So PAAMcO careful assesses the procedures in place. benjamin thinks the calibre of the fund manager is more important than the strategy or track record. Most emerging fund managers have track record; but track record is difficult with new funds, he explains. Fund managers who come out of a bank running a prop desk are usually running on a Var limit or something similar, and you can make assumptions about that and make assumptions about capital and time. we try and get some kind of understanding of how comfortable they are, how they are going to run the fund and see if we can make an estimate of the team profile that you would expect. Managers who were at a hedge fund previously may well have their own book, which may or may not be identifiable, he adds. reference and due diligence checking around managers or groups is also essential to really
ISSUE 03 March 2012
understand how they made their money, and if that is something which is going to translate into a new vehicle which they will be able to replicate. calibre has generally been high, he notes. better in the last couple of years than it was in 2006-2007, then a much easier environment to raise money and when the whole financial market was a bit frothier.
Favourite strategies
The favourite strategies in the past 3 years were equity long/short, followed by event driven, according to citi. The least favourite were systematic futures and convertible arbitrage. hSbc has seen launches across all strategies. within The hSbc Next Generation Fund, the managers have invested across equity long/short, event-driven macro, and managed futures. They avoid the less liquid strategies such as distressed debt, although there are people launching in that space.
More new launches

At the same time, there are more new launches, and this is likely to continue in 2012. This is not only due to the Volcker rule but also the fact that hedge funds have been underperforming since 2008. This creates more supply than demand, so investors are better able to negotiate terms, and managers have to increase their marketing process. Managers often have 80 to 100 meetings with d1/ES investors in order to obtain 2 to 4 investments, says citi, citing several hedge fund managers who said they wished they had known more about the d1/ES investment landscape before starting their marketing campaign.
17
Focus
benjamin sees emerging managers coming from banks and from the larger hedge funds: The two main reasons why you saw more people coming out from other hedge funds in 2010-2011 - compared to 2008-2009 - is firstly, raising capital has become less difficult than it was immediately following the crisis. Secondly, a lot of those larger hedge funds suffered from drawdowns during that period and, therefore, their ability to remunerate staff with large fees was challenged. So, you will see some of the more talented people within those groups thinking, maybe this is the time to strike out on my own. There are groups that are spinning out from the investment side, from the operations side and some from the marketing side too. Some of them are big groups with around 10 to 20 people.
ISSUE 03 March 2012
She sees launches across various strategies, although it seems to be seasonal. The number of launches picked up in 2010 and in 2011, but it still appears more challenging to raise capital than before 2008. besides, as is well known, most of the capital continues to flow to larger, more established funds. For the full year 2011, investors allocated $70bn of net new capital to hedge funds; $50.7bn of this net new capital went to hedge fund firms with greater than $5bn in AuM, while firms with less than $5bn experienced a combined net inflow of $20bn, said chicago-based data provider hedge Fund research (hFr) in January. hFr added that, concluding a difficult year for FoFs, investors withdrew $7.2bn in 4Q11, bringing FoF total capital to $629bn. The FoF industry may have decreased in size, but its expertise which allows it to source and carefully select emerging managers is invaluable. In our opinion, Fridman concludes, that most of the capital goes to bigger funds may leave the emerging space more inefficient and present more interesting opportunities for investors who have the capability to invest in early stage. The herd targeting big and famous names might not be such bad news after all for the young and nimble ones.
hSbc is invested in many of these larger hedge funds and monitors what happens when people leave: we have not had cause to divest from many of the larger funds that we are in, but we have been concerned about them loosing investment talent or operational staff. Nothing has been that significant. benjamin says. For her part, in recent years, Fridman has seen many managers coming out of bank prop teams. when PAAMco started 12 years ago, some of the new managers came from long-only funds and did not have tried-and-tested shorting skills before starting their funds. Now we are seeing a more mature pool of new managers, she says.
- benedicte Gravrand
18
Q&A
People always want to know about emerging managers
Katherine hill, managing director at Geneva-based Palladio Alternative research, conducts in-depth research for investors of all types. She finds that if the investor already has a deep understanding of the strategy of the new fund, the fund manager doesnt have to start from the beginning. Also, the timing of the track record is important. The most important things to assess in a new manager, according to her, are core competence and operational set-up not necessarily performance. Furthermore, for investors, choosing the right individual is more important than the strategy of the fund.
ISSUE 03 March 2012
Question: do you research emerging hedge fund managers for institutional clients or other clients? Answer: The hedge fund research that I conduct can be applied to all investor types, institutional clients but also high net worth individuals and family offices. I found all investors are interested in emerging hedge fund managers; they are not always ready to allocate to them but they definitely want research on them. The research that is provided to investors is somewhat of a standard template. Even though all investors who invest in hedge funds are supposed to be sophisticated, some of them are more sophisticated than others. So, you do not necessarily change the research that you present to them, but sometimes you go into more depth about explaining the strategy or the background of an emerging manager. Some investors need more background or explanation than others. A former bond trader, for example, can pick-up very quickly on the strategy when you talk about a fund manager who came out of a large banks fixed income desk. So the research report and the conversation may be slightly streamlined or modified even thought the template of the report is the same. Q: It has a lot to do with affinities, sometimes new hedge fund managers might actually be lucky when they find investors who actually understand very well what they are about. A: Absolutely. A lot of times, even though the fund is new, the manager
Katherine Hill
Also, investors also love the idea of discovering new talent or getting in early. discoveries such that of ThirdPoint, which grew from $20m in 1996 to $1.9bn and has annualized 16%, or lansdowne UK, which grew from $890m in 2001 to $9.5bn and which has annualized 11%, or still, brevan howard, which grew from $1bn in 2003 to $25bn, and with annualized returns of 13% (figures from hSbc), serve as great past examples. Opalesque asked Katherine hill to talk about her research procedures and the trends she has been observing of late.
19
Q&A
will have a track record or experience or reputation already. Then, they are technically an emerging fund. but if investors already understand what they do from their past firm or if they just have experience in that particular strategy already as well, that allows the conversation to go a lot quicker. Q: when you research new hedge funds, what do you look at that is different from your research of other, more established hedge funds? A: what is really interesting and makes a new fund compelling is the background of the portfolio manager. The fund may be only a year old or two years old, but where did this person come from? where did he or she work prior to this? where did they get their training? They may come from a bank where they were a prop trader or from a hedge fund. do they actually have separate track record that they could take with them to show their results? what did they contribute? Now, with some hedge funds, a few of the very big hedge funds, you are actually not allowed to take your performance with you. The fund manager can say I successfully contributed to this hedge fund, I was employed there for three years and this is what I traded. Other places have no problem with that, but some funds do not let you take your track record with you. So, that can be a little tricky, because you really would want to know what their track record was at the previous firm. I want to know the background, the pedigree, the education, how long they have been in this industry, and then who else have they worked with. Q: Is a five-year track record too small? A: I would say no. You have to look at each manager and evaluate their background. because maybe the fund has only been around for 5 years but the manager has been trading that strategy for 15 years.
ISSUE 03 March 2012
but also the past five years have just been unbelievable. You do want to evaluate a track record according to the time period, because in the hay days of this industry, everybody did well. So, it does depend on when. but also there were analysts who did excellent work at a fund and then left the fund and they do not have five years of a track record. Then they launch a hedge fund and they are fantastic. So, there is some faith involved as well. Q: what other factors are important when assessing a new manager? A: Obviously, you need to ask what the strategy of this new fund is. Is this their core competence? because there have been examples of a portfolio manager that may have only traded in a certain markets and then he or she launches a multi-strategy or global macro fund. If that is not their core competence, that is something you look at too. what makes them think that they are going to have an edge or be good at running that type of fund when they only have experience in one area. Then also very important for managers who are less than two years, but also really for all managers, is, how close are they to the break-even point on their operational set-up? how strong are they as a business? The days of two guys and a computer in a garage just does not work anymore. Even though your performance is great, that just does not work anymore. You need more of an institutional set-up. Those are some of the first things I want to know. There are many other things you have to ask, but when I first meet someone at a conference for example, those are some of the first things I would want to know. I want to know them as people before I just start evaluating their numbers. Even though past performance is not an indicator of future performance, it is human nature that past behavior is the greatest predictor of future behavior. 20
Q&A
Q: what trends have you observed among emerging managers? how different are managers now from a few years ago? Are they less carefree? A: I would say they are. when I first started in this industry almost 10 years ago, there were more cowboys and they tried to just start-up in their homes trading and some made people a lot of money. but, now, the launches are done more professionally, they are coming out of a shop and they know how to promote themselves, they know they need this institutional backdrop, and they know they need certain requirements for investors to feel comfortable You need to hire an investor relations person, a cOO. So, the trend is to go out with a full package. Maybe if they are not ready for that yet, then they trade internally with friends and family money and a little seed capital at first and establish a track record. Then they can go to the market later on, when they are stronger and more institutional; otherwise it is very difficult. Some pension funds will not talk to you if you do not have two years of track record. The trend I have seen is that when people do come out or do start marketing they are coming out with a much more professional package and they have done well; last year, there were 1,100 launches. Many of the fund managers come from a bank or a big fund; they have studied it, they have been a part of it, they know what worked, so they are able to put that knowledge to work in their new fund, rather than someone just launching out of nowhere (I do not see that as a much at all). Q: what about the strategies?
ISSUE 03 March 2012
A: Funds launching all strategies in all areas and frontier markets, for example, as well. Even in just a brief scan of launches there have been a lot of global macro funds that have launched, a lot of multi-strategy, and finally a number of long/short equity that can be directional. Those seem to have been the favorite strategies launching lately when it comes to who is likely to do well, then that is tricky. So far we have seen, in January, the markets were up and that is a classic January effect. So, what does that mean? Some of the data has been quite positive but does that mean that it is going to be that way for the rest of the year? Probably not, because there are going to be a lot of bumps along the way. we have to think about oil prices, Syria, dislocations in Asia (not just china but surrounding countries and Japan.) with Europe being right here in the middle of it. Someone who is long/short equity or global macro with more of a trading style, liquid, able to move in and out very quickly could take advantage of short-term opportunities and may stand a better chance, because there is so much uncertainty. In January even though the markets were up, hedge funds across-theboard were not posting high positive returns because many had positioned themselves too defensively; they were afraid and they were not able to take advantage of the rise. Again, investors more and more are not investing in broad strategy buckets as much as they are investing in good managers. Manager selection and choosing the individual is more important than the strategy of the fund. It is investing in human capital. You want managers who are excellent and can navigate many different scenarios well, but someone who can be more tactical in this environment may fare better. 21
Q&A
Q: can you expand what you see in investors attitude towards emerging managers? A: In my experience investors always want to know what is new, who is new, who is launching what. In this industry the information flow is so important and investors also love the idea of discovering new talent or getting in early. It is like Facebook or Google before they were huge. So, even if the investor is a part of an institution that may be too large and cannot invest day one or seed or cannot look at somebody unless they have a three-year track record and half a billion in AuM, the investor will still want to know about emerging managers. Their attitudes is I want to know who is out there, who is launching what, I would like to keep tabs on that. but look at the cycle of investors and where they are putting their money. After the financial crisis in 2007, investors pulled out of emerging managers and they went into large established managers; then after 2011 it was shown that, that was not necessarily going to be a safe haven. Investors have always been interested in tracking emerging managers, but now you can see it because large institutions like Goldman, blackstone, reservoir capital, Morgan creek as well as cantor Fitzgerald, Protg Partners, Scb bank that have launched or will launch seeding platforms in emerging managers. So, that tells you that these big institutions also believe there is talent out there and that we need to get in early. That trend has always been there, people always want to know about emerging managers, it does not mean they are necessarily going to allocate to them. They have not been lately,
ISSUE 03 March 2012
but I think it is more likely and the trend will be that they will now and in the future allocate more to emerging managers
22
Launches
1,113 hedge funds launched, 775 liquidated in 2011: HFR
2011 the strongest year for new launches since the global financial crisis, said Kenneth J. heinz, President of hedge Fund research (hFr), a chicago-based data provider. he added: while some have suggested that increased regulation may deter new fund launches, many hedge funds are launching not only as a result of increasing investor risk tolerance, but also as a result of these regulatory changes to trading activities and risk oversight at financial institutions. The hedge fund industry has and will continue to expand and innovate to offer more sophisticated and transparent strategies to meet the requirements of institutional investors. These words of encouragements, issued in March, came with the following figures: hedge fund launches (from new and established managers) totalled 1,113 in 2011 (including 270 in 4Q11), the highest calendar year total since 1,197 funds were launched in 2007. 2. Fund liquidations declined from 3Q, with 190 liquidations in 4Q11. 775 funds liquidated during the year a bit more than the 743 that did it in 2010. The total number of funds rose to 9,523 in 2011, while total hedge fund industry capital rose by 3% from 2010 to $2.02tln. New fund launches in 2011 were concentrated in Equity hedge and Macro strategies, with 479 and 265 fund launches, respectively 3.
ISSUE 03 March 2012
(although Equity hedge also experienced a high rate of liquidations, with 293 funds closing). Attrition in Fund of hedge Funds declined to a pre-financial crisis level; FOF experienced 215 closings in 2011, the fewest liquidations since 2007. Slightly more funds were launched in the US than Europe, while liquidations were higher in Europe; two reversals from the prior year.
We recently heard of the following ex-hedge funders striking out on their own:
1. rupert dyson, a former portfolio manager at london-based hedge fund firm Sloane robinson, set up Edale capital and will launch a European long/short equity hedge fund later this year. wuzhu Asia Partners, founded by former director of Asia research at New York-based hedge fund Kingdon capital Kyu ho, launched a pan-Asia long/short equity hedge fund on March 1st. It is backed by hong Kong-based hedge fund seeder Samena Asia Managers. Former huatai Asset Management cIO Yang Yang and veteran derivatives trader Yiming liang are to launch a Greater china-focused macro hedge fund from their new hong Kong-based firm, Goldstream capital Management.
23
Launches
4. robert lacoursiere, the Paulson & co. partner who oversaw the $23bn hedge funds team of banking analysts, recently left the firm after four years to start his own equity hedge fund, which should be done within six months. Eli casdin, most recently of Alliance bernstein, and brian Shim, previously with FrontPoint Partners, launched a long/short equity hedge fund from their recently established New York hedge-based firm casdin capital. Sky wilber and david charney, both former executives at equityfocused Kensico capital Management, launched long/short equity fund firm called Foundation Asset Management, in New York.
ISSUE 03 March 2012
Stewart, in Q2, while taking several JPMorgan employees with him. deepak Gulati, who was slated to move into JPMorgans asset management division, is also considering exiting the company to start his own fund, based on Zurich. 11. douglas Ormond, former JPMorgan chase executive director and portfolio manager for proprietary trading, and Michael Schwartz, former star principal and head of research at Normandy hill capital, will launch in New York in Q2 Otlet capital Management, a special situations and capital structure arbitrage fund.
5.
6.
New seeding ventures and platforms:

12. Grosvenor capital Management, a large fund of hedge funds manager, launched a seeding fund, reportedly its first formal effort to provide capital to new managers since 1999.
Among former bankers:

7. UbS AGs cIO for macro strategic trading in Australia, Gerard Satur, is preparing to spin out of the Swiss bank next month to start his own macro hedge fund, MsT capital. Noel Thompson, a former vice president for global futures trading at JPMorgan chase, will launch his first global macro hedge fund on March 26, called Thompson Global Partners, in New York. yoshihito Asakawa, a former Mitsubishi UFJ Morgan Stanley Securities co. trader, will start a Japan-focused hedge fund in May that will invest in credit derivatives and currencies.
8.
9.
10. Mike Stewart, JPMorgan chases global head of proprietary trading, is planning to leave the firm to start his own investment fund, whard
24
The Analytical View

Established fund firms out of favour among researchers
Emerging managers lap investment elephants: Ted Krum
In his update paper on fund performance, no contest: Emerging Managers lap investment elephants, Ted Krum, Vice President and senior investment program manager at Northern Trust, a large wealth and asset manager, may be talking about long-only funds, but, he told Opalesque, a lot of it applies to hedge funds too. In his eighth study of emerging fund managers (in the last 20 years), which are defined as the smallest firms making up the last 1% of institutional market share, the paper finds that once again they often can provide better returns and, strikingly, better downside performance than the household names. by 2010, the median small manager outperformed the median large firm by 72 basis points per year; furthermore the largest investment firms kept on getting larger (even with weak returns). Ted Krum In the last 20 years, there were times when small managers did not outperform the large ones, he explains. In particular, in a market environment which has a lot of liquidity being dumped onto the financial markets, some of the smaller managers may find it difficult to keep up because the bigger firms, in ever increasing concentration, will be making up the majority of the market.
ISSUE 03 March 2012
but the consistency that he found each time in his research is the greater dispersion; emerging managers do not always outperform but their results are more dispersed with higher highs and lower lows. As larger firms make up the majority of the market, when there is a downturn, it is simply difficult for them to get out of their own way, he says. The smaller firms will have a liquidity advantage; they will also have an advantage in being able to make quick decisions without going through a commodity-style investment process. within the hedge fund universe, he finds there is also the issue of the liquidity of the trading instruments themselves. So here it is not only the environment of the transactions but the liquidity of the instruments which would give advantage to the smaller firms. Krum preferred his study to focus on traditional portfolios because this universe is quite uniform compared to the hedge fund universe, and besides, there has not been any good data especially dedicated to emerging hedge fund managers (we now have Opalesques Emerging Managers database, so we sorted that one out). And there is the issue of non-response bias in the statistics, which is much higher among hedge funds than among long-only products, he adds. As investing with smaller firms is more work for investors, he recommends investing in a fund of funds or in a multi-manager investment programme, where investors are able to pull their research dollars with other investors.
25
The Analytical View

Another thing that Krum has seen time and again is that investors, especially large ones, continue to make the assumption that investing with well known names is intrinsically safer. And yet that has turned out not to be the case, he notes. but investing in new funds through a fund of funds or a multi-manager firm makes the risk of investing in them quite manageable.
ISSUE 03 March 2012
record of less than 3 years are screened out; consultants make it a rule not to own more than 10% of any emerging manager (which is tough on managers with few assets if the consultant has a set minimum sum); and furthermore, emerging managers find it difficult to efficiently absorb a lot of money in new assets. All this has kept institutions from making allocations to them. however, the paper says, emerging managers do tend to outperform larger, established ones by nearly 3% annualised in Small cap Growth and more than 2% annualised in Small cap Value over 5 years (Tina byles williams, Survival of the Nimble). And they dont take on additional risk. So consultants - and reluctant cIOs - who screen them out are in fact underperforming. The authors describe the problems that large fund management firms encounter, as such: They have a tendency to become complacent, They may trade in old paradigms or in crowded strategies, Their correlations to other funds and to the market go much higher, They may find it difficult to get out of their way, due to the relative size of their position as compared to the market theyre invested in, They can morph into an organisation which lacks that entrepreneurial edge, They may prefer taking the management fee than worrying about the performance. compared to newer, smaller firms, who benefit from: Management focus and fewer liquidity constraints, More motivation, less bureaucracy, better performance in bear markets, Ability to buy stocks from undiscovered places, greater freedom to 26
Investors equate size with safety, often with disastrous results: Alpha Strategies
This leads us to a recent paper that gives further details about the pros and cons of investing in larger investment firms. The first investment consulting firms were created in the wake of the passage of ErISA (Employee retirement Income Security Act) in 1974 in the US, and from them sprung a whole lot of other consulting firms, which more ore less continued applying the same philosophy. Jay rogers and Thomas barrett, principals with Alpha Strategies Investment consulting, and the authors of a recent paper called Groupthink: how investors are driven to mediocrity, claim this is when groupthink started. Groupthink that says, among other things, that one should invest in a well-known, established fund manager. 2008 showed investors that investing with a big firm is not safer; in fact, the larger firms were more leveraged and were so large that they disconnected themselves from reality. The paper cites the demise of Amaranth, bear Stearns, lTcM, Madoff, Pequot, Galleon Group, and more recently MF Global as examples. however, to this day, consultants who work with pension plans, foundations and endowments, find it difficult to deviate from the habit of investing in large and established fund managers. hedge funds with a track
The Analytical View

invest in less scalable opportunities, leaner, more nimble investment teams leading to rapid decision making processes. Some large hedge fund firms are doing very well, despite their size: look at bridgewater, which flagship was up 36% last year and annualised 22% since inception. A counter example would be Paulson & co., made famous among other things by its bets against subprime mortgages in 2008, where all funds made losses last year (one was down 50%). The Alpha Strategies paper quotes several studies to prove the point that emerging managers can benefit investors more: one by PerTrac which found that the youngest decile funds beat the oldest decile funds by 970 basis points per annum and concluded that younger funds outperformed the larger funds, and with lower risk. The youngest funds had: a) the highest absolute returns; b) the best risk-adjusted returns; and c) performed better on the downside, losing less than the established funds. There is also one from Pension consulting Alliance, which found that the distributions of emerging managers returns were more often normally distributed than their mainline counterparts. And rajesh Aggarwal (University of Minnesota) and Philippe Jorion (UcI), who found that emerging funds tend to add value in the early years, before deteriorating. Just like Ted Krum, the authors recommend investors the use of a manager of managers to access emerging managers. Those can do the research, the operational due diligence, and monitor progress. So we are told again that it is best to delegate, to leave the navigation of a complicated emerging manager universe to experts.
ISSUE 03 March 2012
Half of the US hedge funds created in 2011 had an equity-related investment strategy: Seward & Kissel
On a separate note, a law firm has been doing some statistics on new US hedge funds and came up with the results recently. Seward & Kissel, the US-based law firm that helped create the first hedge fund over 60 years ago, issued its first study of new US hedge funds last month, Opalesques New York editor bailey Mccann reported. The Seward & Kissel 2011 New hedge Fund Study says that half of the new US hedge funds created in 2011 had an equity or equity-related investment strategy, with about a third of those focused solely on US equities. Of the remainder, 20% were multi-strategy offerings, approximately 10% were credit or credit-related strategies, and the balance consisted of structured products, managed futures, and commodities. Fees are also back up to around 2% for new funds because there is a tremendous increase in the regulatory burden placed on funds, Steven Nadel, partner in the Investment Management group, told her. The size of launches has also gone down so when you combine increased infrastructure requirements and a smaller asset base youre seeing that 2% number return. I expect interest in US equities will remain strong throughout 2012. he concluded. weve also seen some new interest in structured finance, credit and global macro.
27
Perspectives
commentators this month noted on the plight of the Asia-focused emerging managers who cannot raise capital, on the new burdensome technological requirements that new hedge funds have to face, and on the benefits of being small and nimble.
ISSUE 03 March 2012
Asia hedge funds shutting down

Asia-focused hedge funds that launched after the 2008 credit crisis are shutting down as a shrinking pool of key investors makes it harder for them to raise capital, said bloomberg in early March, citing Isometric Investment Advisors and blacks link capital which decided to close shop after heavy investor withdrawals. All the smaller funds of funds who used to help and family wealth who used to help early managers grow are just not there, said richard Johnston, hong Kong-based Asia head of Albourne Partners ltd., a consulting firm, told bloomberg. The gap between seed capital and getting to a good meaningful sustainable size of $500 million plus is a hard gap to plug. Sadly, hong Kong-based Triple A recently decided to discontinue its seeding activity due to a lack of investor appetite. learn more about Asian start-ups from our last issue of New Managers here: Source.
Now you have to have at least two prime brokers out of the gate, and that creates operational headaches, Sameer Shalaby, president of buy-side technology provider Paladyne Systems, told Advanced Trading, noting that a decade ago, a new hedge fund could launch, set up an account with Goldman Sachs and get a technology platform from them in the process. Today, thats gone. You have to have a technology platform that can help aggregate and deal with all the multiprimes. You have to have an ops team. You have to have two counterparties at least. On top of that, you look at the investor demands theyre more savvy now and they want transparency.
Small makes the difference

Even if larger hedge funds are attracting more investor money, their size makes them feel like an elephant in a small room: one that has difficulty moving around, and that is bothered by the overcrowded space. The lean and nimble funds, on the other hand, are just fine in there. Some did better than the elephants in 2011. larger hedge funds have been victims of their size and the volatile markets in general, Andrew lee, a New York- based adviser at JPMorgan chase & co.s wealth-management unit, which helps clients find emerging managers, told bloomberg in February. Smaller funds are able to react quickly and so are better positioned. It makes a lot of sense to invest in the speedboats over the oil tankers, added ben Funk, head of research at london- based liongate capital Management llP, which has more than $3bn allocated to various hedge funds.
New technological requirements

New hedge funds, whether or not they manage to get seeding capital from the investment banks which are now venturing into this area, beware; new technological requirements and the post-2008 investment landscape mean the barriers to success are higher than ever, warned Advanced Trading.
28
Profiles
After a tough 2011, Acacias long/short equity fund bets on resources
The Acacia Master Fund, ltd. is a bVI-domiciled directional long/short equity fund that invests in technology, china and resources. launched in November 2009, the $14m fund returned 29% in its first year, 66% in 2010 and -23% in 2011. It was up 0.46% in January 2012. comparatively, the hFrX Asia ex-Japan Index returned 1.87% in January (-13.81% in 2011); the hFrX Energy/basic Materials Index was up 0.85% (-8.40% in 2011. ryan weidenmiller, who founded beijingbased Acacia capital Management, Inc. in January 2009, previously founded and built a Top 10 venture fund in china, which has seen twelve companies conduct IPOs to the NASdAQ and NYSE markets totalling more than $6bn in market capitalization. Acacia featured in Opalesque in November 2011 (Opalesque Exclusive: china-based hedge fund beyond bearish on the fate of the Euro and Europe), and the fund is in Opalesques Emerging Managers database.
ISSUE 03 March 2012
ryan weidenmiller and luke diaz, director of investor relations, talked to Opalesque about the opportunities that they see going forward. we focus on areas we believe we have an edge in understanding where various management teams and corporate strategies may be going, and we combine this with in-depth, bottoms-up, fundamental analysis, weidenmiller says.
Opportunities
There are a number of segments that they like in china, he explains. On the long side, they like areas related to services, as the increasing spending power is taking hold. Areas in the Internet and media sectors are also full of opportunities. On the short side, they focus on issues that continue to feel pressure, such as exports, and other areas that have fundamental flaws or structural wage pressure. There has been access to cheap credit in the past four or five years, weidenmiller notes. we think that will continue to unwind as the economy makes its transition and certain companies and industries will suffer over the next year or two. In technology, Acacia is interested in various IT services stocks and the internet. The firm has been looking at the technology trends in emerging markets for the past decade, as many of the technologies are now exported around the world, and as demographics take hold there. They invest in ideas which are geared to the emerging middle class; they think china and other countries are hitting interesting inflection points.
Ryan Weidenmiller
It invests in variables of individual companies, particularly china, the TMT (technology, media and telecommunications) sector, natural resources sector, and areas that the managers, who have been investing in those sectors for more than a decade, think have an edge.
29
Profiles
ISSUE 03 March 2012
commenting on the funds past performance, weidenmiller notes that the 2010s performance was far beyond Acacias and its partners expectations. The managers simply continued to hold these positions for too long as they entered 2011. Some of the dips they saw were a mean-reversion of some of the positions correcting. The impact was primarily in the first half of the year, as some the funds resource investments from 2010 were disproportionately impacted with the European issues, and fears of a US slowdown and a china hard landing (neither of which really happened). The managers adjusted the strategy and positioning to reduce volatility during this period. looking forward, we have a better balance now of companies which may fundamentally suffer and which may outperform, regardless of rising or falling macro-economic fears, he concludes. For our longer term average, we are still at the high-end of our targeted return and we believe that we have a number of opportunities which could continue to serve as a catalyst this year.
Acacia Master Fund, Ltd. Cummulative Performance Chart (Dec-08 to Jan-12)

but resources are what Acacia thinks as the most interesting and exciting area in the short and intermediate term. weve been particularly focused on china coal; new coal mines will go into production in Xinjiang to reduce energy imports, which will help keep energy costs down, he explains. The government is really focused on maintaining a balance on inflation and only a handful of companies have the potential to be involved in a joint venture in this sector. Its a very unique opportunity. we have worked on that with our partners in the last year and a half, and we like the opportunity because it is very unique and only two investment firms, through a specific placement, have had the opportunity to gain access to backing the management team as they progress towards potentially securing a joint venture deal. The Acacia Master Fund can be found in Opalesque solutions Emerging Managers database, which is available to Opalesques subscribers. You can subscribe here: Source. If you want your fund to be part of the Emerging Managers database, please send your information to: db@opalesque.com
30
Profiles
In February, we heard that Sal Naro, former co-managing partner of Sailfish capital, a $4.4bn asset management firm with $2bn in hedge fund assets, was launching an asset management firm called coherence capital Partners llc, of which he will be the cEO. Sal Naro was most recently a shareholder in and Vice chairman of louisville, KY-based Jefferson National Financial (JNF) corp. and cEO of Jefferson National Asset Management. coherence was created from the management buyout of Jefferson Nationals core insurance unit. The new firm, which will be based in New Sal Naro York, will run traditional and non-traditional fixed income assets, and will manage a portion of Jefferson Nationals portfolio of $100m. Sal Naro told Opalesque he is planning to launch a long/short credit fund sometime this year. The fund will focus primarily on US and European credits from the high grade to the high yield markets. The fund will focus on credits that offer reasonable liquidity, he tells Opalesque. Furthermore, it will be quite transparent and liquid. Its overall mantra, he says, will be investing long in companies that are meeting and beating their earnings expectations in the industries that are outperforming. On the short side, the managers will be looking at positioning in sectors and companies that are missing
ISSUE 03 March 2012
Sal Naros new firm Coherence to launch long/short credit hedge fund this year
and lowering their earnings guidance and expectations and which balance sheets are weakening or deteriorating. That will also include some that have structural risks inherent in them. Our investment style has never been to average down, to double down, to triple down, to buy more on a dip and then buy more on a larger dip, he explains. we feel that names that are improving are rich and they are rich for a reason. Typically they get richer; and cheap names typically are cheap for a reason and they get cheaper. Our investment mantra is to try to attain portfolio and price appreciation on our names, on our longs, and price depreciation on our shorts. That is overall how we look at the fixed income credit markets; we look at them very much from an equity perspective. The fund will have sovereign exposure at times, invest across the board but will be primarily focused around preferred stock, corporate bonds and cdS. The hFrI Fixed Income-Asset backed returned 6.53% in the last 12 months (to February 2012) and the hFrI Fixed Income-corporate Index returned 1.34% in the same period. As for hennessees Fixed Income hedge fund Index, it is up 2.38% YTd and returned 3.29% in 2011.
Opportunities
To spot opportunities within the fixed income space, Sal Naro believes that one has to have a macro view.
31
Profiles
You could come up with the worlds greatest shorts, but if the markets is in a period where all boats are being lifted by a rising tide, your shorts are just going to cost you a fair amount of money, he notes. In a fund that is reasonably liquid, you should be dynamic enough to change your portfolio composition from a long/ short perspective to take advantage of those moves. he feels that the US continues to be in a protracted but moderate recovery and earnings are generally continuing to be positive. So the funds long positions would be more concentrated around the US. On the short side, he sees opportunities in Europe, which could well include sovereigns. The elephant in the room is behind Greece, he says, and it is Italy, Portugal, and potentially Spain. Sectors that will continue to struggle are the financials, especially the European banks. he finds it very difficult to be bullish on financial institutions, globally. There is still a lot of noise in that sector that has to be ironed out. Other struggling sectors could be pharma and healthcare, where there is a lot of stress. Managed healthcare specifically, ahead of the US presidential elections. The auto sector looks more positive though. he thinks that companies like Ford and daimler have improving credit. And the energy sector looks good too, especially oil. There are some high-yield credits there that we fancy, he explains. Obviously, oil continues to outperform and while it may be in some sort of a trading range it is hard to see longer-term how oil will not appreciate, at least, over the next six months. bloomberg reported that the price of oil dropped the most in more than three months on March 20th, as Saudi Arabia, the worlds biggest crude-exporting
ISSUE 03 March 2012
country, said it can boost output immediately to stave off shortages. Sal Naro also likes cable and telephone companies which are still meeting earnings expectations and improving their capital structure. This is where we see opportunity in the more dynamic strategies, he notes.
32
Profiles
Noblesse Oblige capital is a New Jersey, US-based managed forex account, solely managed by asset manager Nikol M. dor. The company is registered with the commodity Futures Trading commission (cFTc) as a commodity Trading Advisor (cTA) and is a member of the National Futures Association (NFA). The Noblesse Oblige Proprietary Account is an aggressive, discretionary currency FX trading strategy based on technical analysis, incepted in January 2010, and with $1m in AuM. The strategy Nikol Dor is a leveraged combination of technical and fundamental analysis trading the FX majors, including the UK pound, Euro, Swiss Frank, the US dollar and the Japanese yen. It is currently featured in Opalesque Solutions Emerging Managers database. In an exclusive interview with Opalesque, dor explained that she chose this strategy after several trial and errors with multiple strategies. I chose the strategy which was best in line with my temperament, as a trader. My strategy has rewarded well since inception and with some minor tweaks, I expect it to continue to reward me in the future, she said. when pressed to comment how her strategy has fared so far, dor explained that NOcs approach seems to have worked well in the prevailing market conditions after taking greed out of the strategy.
ISSUE 03 March 2012
Currency CTA Noblesse Oblige Capital makes enough in January for the year
I set a fair yearly goal of 20-25% and once that goal is reached whether in January or december, I am done for the year. As you can see from my January 2012 performance, I am done for 2012. My approach to trading is to have a realistic goal and once it is achieved, leave! she said. Given the strong market performance at the start of 2012, Noblese Oblige has performed well compared to other strategies. As at end of January 2012, NOcs program achieved a remarkable +34.84%, surpassing by almost 10% her maximum annual income margin of 25%. her January performance was a complete reversal of her programs -68 % finish in 2011, despite a huge +47% gains in July that year that was quickly offset by a -57% loss in August. The program did not have any profit-loss generation from September to december. but she should have left in July while she was winning, just like she did this January. The factors affecting my performance [taught me] when to take my profits and leave, rather than continuing to risk it in the markets. My total 2011 performance was a -68.35% for the sole reason, that I was greedy and did not leave the market, when I was in profit . . . a mistake I will never make again, dor narrated. dor further stated, Since I managed to accomplish this in January 2012, I am done trading for the year with a total profit for 2012 of +34.84%. The fund returned 16% in 2010.
33
Profiles
ISSUE 03 March 2012
dors fund is still down around 17%, but she may not trade to regain all her loss this year. I have no doubt that given my current performance in 2012, I will have no problem regaining my loss next year and continue to have positive performance, she said. I am not looking to have great years here and there, as I expect short-term volatility. I look to have a good sustainable performance for the long term. Noblesse Oblige capital can be found in Opalesque solutions Emerging Managers database, which is available to Opalesque subscribers. You can subscribe here: Source. If you want your fund to be part of the Emerging Managers database, please send your details to: db@opalesque.com.
Noblesse Oblige Proprietary Account - Cumulative Performance Chart (Jan10 to Jan-12)

cTAs have gotten off to a slow start in 2012, says Sol waksman, founder and president of barclayhedge, said in January, when the barclay cTA index returned 0.05%, and the currency Traders Index gained 0.69%. In 2011, the cTA index lost 3% and the currency Traders index gained 2.34%. dor named the firm Noblesse Oblige capital which comes from the latin phrase noblesse oblige, which literally means nobility obligate. More figuratively noblesse oblige is generally used to imply that with wealth, power and prestige comes responsibilities. In American English especially, the term is sometimes applied more broadly to suggest a general obligation for the more fortunate to help less fortunate. I could choose to only trade my own personal money with my trading strategy, but instead, I choose to share it to allow others to benefit from it, dor said.
- Komfie Manalo, Opalesque Asia
34
Document Disclosure
This newsletter is designed to include a wide variety of industry voices and information. To participate, send your news, events and viewpoints to gravrand@opalesque.com. To be considered for inclusion information must be factual, not promotional in nature and ideally address deep industry issues and reveal insight into how strategies operate, all delivered from a balanced perspective that addresses risk frank terms.
ISSUE 03 March 2012
ThE USE OF lEVErAGE cAN lEAd TO lArGE lOSSES AS wEll AS GAINS. YOU cOUld lOOSE All OF YOUr INVESTMENT Or MOrE ThAN YOU INITIAllY INVEST. IN SOME cASES, MANAGEd cOMMOdITY AccOUNTS ArE SUbJEcT TO SUbSTANTIAl chArGES FOr MANAGEMENT ANd AdVISOrY FEES. IT MAY bE NEcESSArY FOr ThOSE AccOUNTS ThAT ArE SUbJEcT TO ThESE chArGES TO MAKE SUbSTANTIAl TrAdING PrOFITS TO AVOId dEPlETION Or EXhAUSTION OF ThEIr ASSETS. ThE dISclOSUrE dOcUMENT cONTAINS A cOMPlETE dEScrIPTION OF ThE PrINcIPAl rISK FAcTOrS ANd EAch FEE TO bE chArGEd TO YOUr AccOUNT bY ThE cOMMOdITY TrAdING AdVISOr (cTA). ThE rEGUlATIONS OF ThE cOMMOdITY FUTUrES TrAdING cOMMISSION (cFTc) rEQUIrE ThAT PrOSPEcTIVE cUSTOMErS OF A cTA rEcEIVE A discLOsurE dOcuMEnT whEn ThEy ArE sOLiciTEd TO EnTEr inTO An AgrEEMEnT whErEbY ThE cTA wIll dIrEcT Or GUIdE ThE clIENTS cOMMOdITY INTErEST TrAdING ANd ThAT cErTAIN rISK FAcTOrS bE hIGhlIGhTEd. ThIS dOcUMENT IS rEAdIlY AccESSIblE AT ThIS SITE. ThIS brIEF STATEMENT cANNOT dISclOSE All OF ThE rISKS ANd OThEr SIGNIFIcANT ASPEcTS OF ThE cOMMOdITY MArKETS. ThErEFOrE, YOU ShOUld PrOcEEd dIrEcTlY TO ThE dISclOSUrE dOcUMENT ANd STUdY IT cArEFUllY TO dETErMINE whEThEr SUch TrAdING IS APPrOPrIATE FOr YOU IN lIGhT OF YOUr FINANcIAl cONdITION. yOu ArE EncOurAgEd TO AccEss ThE discLOsurE dOcuMEnT. yOu wiLL nOT incur ANY AddITIONAl chArGES bY AccESSING ThE dISclOSUrE dOcUMENT. YOU MAY AlSO rEQUEST dElIVErY OF A hArd cOPY OF ThE dISclOSUrE dOcUMENT, whIch wIll AlSO bE PrOVIdEd TO YOU AT NO AddITIONAl cOST. MUch OF ThE dATA cONTAINEd IN ThIS rEPOrT IS TAKEN FrOM SOUrcES whIch cOUld dEPENd ON ThE cTA TO SElF rEPOrT ThEIr INFOrMATION ANd Or PErFOrMANcE. AS SUch, whIlE ThE INFOrMATION IN ThIS rEPOrT ANd rEGArdING All cTA cOMMUNIcATION IS bElIEVEd TO bE rElIAblE ANd AccUrATE, PFG bEST cAN MAKE NO guArAnTEE rELATiVE TO sAME. ThE AuThOr is A rEgisTErEd AssOciATEd PErsOn wiTh ThE NATIONAl FUTUrES ASSOcIATION. No part of this publication or website may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States copyright Act, without either the prior written permission of the Publisher.
User agreement and confirmation of Qualified Eligible Person status

The user acknowledges and agrees to all of below: User confirms that they are a Qualified Eligible Person as defined under the (cFTc) regulation 4.7., because they are: registered investment company; bank; Insurance company; Employee benefit plan with >$5,000,000; Private business development company Organization described in Sec. 501(c)(3) of the Internal revenue code with >$5,000,000 in assets; corporation, trust, partnership with >$5,000,000 not formed to invest in exempt pool; Person with net worth >$1,000,000; Person with net income >$200,000 each of last 2 yrs. or >$300,000 when combined with spouse; Pool, trust separate account, collective trust with >$5,000,000 in assets; User also confirms they meet the following Portfolio requirement: Own securities with a market value >$2,000,000; have had on deposit at FcM, in last 6 months, >$200,000 in margin and option premiums; have combination of securities and FcM deposits. The percentages of required amounts must = 100%.
Opinions: User represents themselves to be a sophisticated investor who understands volatility, risk and reward potential. User recognizes information presented is not a recommendation to invest, but rather a generic opinion, which may not have considered all risk factors. User recognizes this web site and related communication substantially represent the opinions of the author and are not reflective of the opinions of any exchange, regulatory body, trading firm or brokerage firm, including Peregrine Financial Group. The opinions of the author may not be appropriate for all investors and there is no warrantee relative to the accuracy or completeness of same. The author may have conflicts of interest, a disclosure of which is available upon request.
rISK dISclOSUrE
PAST PErFOrMANcE IS NOT INdIcATIVE OF FUTUrE rESUlTS. ThE rISK OF lOSS IN TrAdING cOMMOdITIES cAN bE SUbSTANTIAl. YOU ShOUld ThErEFOrE cArEFUllY cONSIdEr whEThEr SUch TrAdING IS SUITAblE FOr YOU IN lIGhT OF YOUr FINANcIAl cONdITION. ThE hIGh dEGrEE OF lEVErAGE ThAT IS OFTEN ObTAINAblE IN cOMMOdITY TrAdING cAN wOrK AGAINST YOU AS wEll AS FOr YOU.
35
accurate
professional reporting service
Opalesque Islamic Finance Briefing delivers a quick and complete overview on growth, opportunities, products and approaches to Islamic Finance. Opalesque Futures Intelligence, a new bi-weekly research publication, covers the managed futures community, including commodity trading advisers, fund managers, brokerages and investors in managed futures pools, meeting needs which currently are not served by other publications. Opalesque Islamic Finance Intelligence offers extensive research, analysis and commentary aimed at providing clarity and transparency on the various aspects of Shariah complaint investments. This new, free monthly publication offers priceless intelligence and arrives at a time when Islamic finance is facing uncharted territory.
ISSUE 03 March 2012
No wonder that each week, Opalesque publications are read by more than 600,000 industry professionals in over 160 countries. Opalesque is the only daily hedge fund publisher which is actually read by the elite managers themselve
Alternative Market Briefing is a daily newsletter on the global hedge fund industry, highly praised for its completeness and timely delivery of the most important daily news for professionals dealing with hedge funds. A SQUARE is the first web publication, globally, that is dedicated exclusively to alternative investments with research that reveals approach, fast facts and investment oriented analysis. Technical Research Briefing delivers a global perspective / overview on all major markets, including equity indices, fixed Income, currencies, and commodities. Sovereign Wealth Funds Briefing offers a quick and complete overview on the actions and issues relating to Sovereign Wealth Funds, who rank now amongst the most important and observed participants in the international capital markets. Commodities Briefing is a free, daily publication covering the global commodityrelated news and research in 26 detailed categories. The daily Real Estate Briefings offer a quick and complete oversight on real estate, important news related to that sector as well as commentaries and research in 28 detailed categories. The Opalesque Roundtable Series unites some of the leading hedge fund managers and their investors from specific global hedge fund centers, sharing unique insights on the specific idiosyncrasies and developments as well as issues and advantages of their jurisdiction.
36
ISSUE 03 March 2012
PUBLISHER Matthias Knab - knab@opalesque.com EDITOR Benedicte Gravrand - gravrand@opalesque.com ADVERTISING DIRECTOR Greg Despoelberch - gdespo@opalesque.com CONTRIBUTORS Peter Urbani, Florian Guldner, Komfie Manalo FOR REPRINTS OF ARTICLES, PLEASE CONTACT: Greg Despoelberch - gdespo@opalesque.com
www.opalesque.com
Copyright 2012 Opalesque Ltd. All Rights Reserved.
37

Opalesque New Managers March 2012

Hochgeladen von

Dokumentinformationen

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Opalesque New Managers March 2012

Hochgeladen von

Copyright:

Verfügbare Formate

ISSUE 03 March 2012

Opalesques Emerging Manager Monitor

ISSUE 01 March 2012 ISSUE 03 September 2011

2 EdiTOriAL 3 EMAnAgErs indicEs February 2012 performance of Opalesques indices of emerging

19 Q&A A researchers view on what investors want from emerging

23 LAunchEsmaiden launches in late February and A recapitulation of

ViEw 25 ThE AnALyTicALbenefits of investing in new Several analysts explain the

13 FOcUS of hedge funds that invest in emerging managers A look at funds

New Managers | Opalesques Emerging Manager Monitor

ISSUE 03 March 2012

New Managers | Opalesques Emerging Manager Monitor

ISSUE 03 March 2012

New Managers | Opalesques Emerging Manager Monitor

ISSUE 03 March 2012

Performance (in %), Volatility and Equity Market Beta (in %)

Eurekahedge Hedge Fund Index Newedge CTA Index MSCI World

2.05 0.87 4.66

4.36 1.46 9.82

-1.00 -2.88 -3.91

-3.97 -4.52 -7.61

10.72 9.26 9.40

20.40 -4.31 27.07

6.11 8.42 18.66

- Florian Guldner, Opalesque research

New Managers | Opalesques Emerging Manager Monitor

New Funds in the database

ISSUE 03 March 2012

New Managers | Opalesques Emerging Manager Monitor

Emerging Managers: Statistics

ISSUE 03 March 2012

New Managers | Opalesques Emerging Manager Monitor

Emerging Managers: Statistics

ISSUE 03 March 2012

160 150 140 130 120 110 100 90 80 70 60

Emanagers Forecast Returns ( Modified Normal )

New Managers | Opalesques Emerging Manager Monitor

Four moment risk and return decomposition of Emanagers Index

Emerging Managers: Statistics

ISSUE 03 March 2012

Graphical representation of selected statistics and funds Emerging Managers: Statistics

ISSUE 03 March 2012

Value contribution towards Excess Skewness and Kurtosis

0.0% -5.0% -10.0% -15.0% -20.0% -25.0% -6.0% -4.0%

0.4% 0.2% 0.0% -0.2%

K & Q Option Select Proprietary Program T2 Associates Contrary #1 Pool

Arcane Index Fund

% Contribution to Modified Standard Deviation

Modified CVaR and Mean

% Contribution to Drawdown at Risk and Liquidity VaR

Kerrisdale Capital Partners LP Infinium Global Fund T2 Associates Contrary #1 Pool

20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0%

LCA 30 Clinamen Financial Volatility Arbitrage Fund

% Cont. to Liquidity VaR

Bernett Diversified Global Fund, L.P.

Noblesse Oblige Proprietary Account K & Q Option Select Proprietary Program

-0.2% -0.4% -0.3% -0.2% -0.1% 0.0% 0.1% 0.2% 0.3%

% Contribution to Draw dow n at Risk

New Managers | Opalesques Emerging Manager Monitor

Emerging Managers: Statistics

ISSUE 03 March 2012

Ratio ( % Contribution to Modified CVaR / Fund Weight )

ISSUE 03 March 2012

New Managers | Opalesques Emerging Manager Monitor

ISSUE 03 March 2012