Transcript Joneses: a Hedge Fund Industry Update

Keeping Up with the (Paul Tudor)
Joneses: a Hedge Fund Industry Update
Sponsored by
TODAY’S CHAT
1. What’s different about hedge funds?
2. Current state of the industry
3. Prospects at hedge funds
4. Hedge funds and philanthropy
FIRST OF (W)ALL (OF TEXT)
Hedge funds are private partnerships in
which the manager or general partner
(GP) has a significant personal stake in the
fund and is free to operate in a variety of
markets and to utilize investments and
strategies with variable long/short
exposures and degrees of leverage.
DIFFERENT HOW?
In search of absolute returns
Exotic investment strategies;
outsized returns (but big risks)
Not for everyone, literally
Lock-up period & redemptions
Also…
HIGH-WATER MARKS
Almost all hedge fund performance fee arrangements include a
high-water mark provision  performance fees only apply to
profits after losses in previous years have been recovered
FOR INSTANCE…
In 2011, an investor gives $500K to a
HF. By year’s end, the investment’s
value falls to $300K. In 2012, the HF
realizes returns of 100% so the
investment is now worth $600K.
HWM provision means the investor
must only pay performance fees on
the gain between $500K and $600K.
CITADEL INVESTMENTS
HF INDUSTRY AUM
$2.05T in AUM at end of 2012
Flat (marginal uptrend) from 2011
But BIG bounceback from 2009’s
$1.29T
AUM BY STRATEGY
Helpful to familiarize
yourself with various
strategies
#3
Chart from BarclayHedge
#1
#2
HF PERFORMANCE
HFs returned 8% on average
in 2012
5% returns through 5/10/13
(635 HFs closed in 2012)
While…S&P returned 16% in
2012 and 15% thru 5/10
STRATEGY RETURNS
BarclayHedge
TO KEEP AN EYE ON
Real Estate (MBS)
Event Driven (Herbalife)
Currency (Euro debt crisis,
Yen)
LANDSCAPE
New York City and London still tops
Other Euro countries enticing HFs:
Monaco, Malta, Switzerland
Brazil is Latin American “beachhead”
VIEW FROM FUND MANAGER’S
WINDOW
DOMESTIC REGS
Dodd-Frank Act (Volcker
Rule)
JOBS Act (crowdsourcing
investment opps)
Carried interest?
OVERSIGHT/DISCLOSURE
GPs with >$150M must
register with SEC
Large HFs must publish
brochure in “plain
English”
Smaller firms to feel $$
pinch of compliance
EUROPEAN REGS
Alternative Investment
Fund Managers
Directive (AIFMD)
vs.
Undertakings for Collective
Investment in
Transferable Securities
(UCITS)
UPCOMING EU CHANGES
Harder to country shop
Leverage and compensation curbs
Affects non-EU funds operating in
the EU
UCITS-compliant funds
underperforming
WHERE TO FIND THE 411
Queued up for your viewing pleasure:
SEC Investment Adviser site (adviserinfo.sec.gov)
Schedule 13F SEC filings (whalewisdom.com)
Investor letters (marketfolly.com)
COMP EVALUATION
Management fees (1% of
AUM)
5% or “skin in the game” rule
Deep dive
HFs GIVING GLOBALLY
RICE (Cambodia, India)
Man Group (Japan)
China Care Foundation
(Bridgewater)
Hintze Family Charitable Foundation (UK)
Hedge Funds Care
Robin Hood Foundation
Open Society Institute (Soros)
Robertson Foundation
Blackstone Foundation
Children’s Investment Fund Foundation
CASE: ROBIN HOOD FDN
Largest private poverty-fighting organization in NYC
$326M in assets in 2011
Over $1B in charitable giving over 24 years; $154M in
2011 alone
CASE: 100 WOMEN IN HEDGE FUNDS
Mentoring (2013), women’s
and family health (2014),
education (2015)
US, UK, and Switzerland
Raised close to $30M to date
CASE: HEDGE FUNDS CARE
Operations in NYC and the
Caymans
International giving with
focus on child abuse
$45M raised for charity since
1988
CASE: CHILDREN’S INVESTMENT FUND FDN
Targeting $100M in charitable investments in 2013/14
Active since 2009 with US and UK boards
Impact areas: child survival, hunger
alleviation/nutrition, educational attainment,
climate
DONE! QUESTIONS?
Thanks to Bill Powers, the
AFP, and Alex Cocleaza ’12