By Niki Natarajan
"Olympism seeks to create a way of life based on the joy of
effort, the educational value of a good example and respect for
universal fundamental ethical principles," according to the
Olympic Charter originally set out by Pierre de Coubertin -
father of the modern-day Olympics.
With the Paralympics in full swing, and most of soggy wet
London still elated from the Olympics itself, it is hard not to
be inspired to perform and excel to the best of one's
But it is the pursuit of performance excellence that many
seem to have forgotten when it comes to investing their time,
money and energy in anything, especially hedge funds. Much like
the 'real' world of couch-based online addicts, investing seems
to have turned into a passive sport with low rewards, leading
to little incentive to perform and win.
Is this really the way to achieve performance mastery?
Olympians would probably say no. To them, de Coubertin's words
resonate like a mantra: "Olympism is not a system, it is a
state of mind." I would argue that this is true also for all
great hedge fund investors.
As the hedge fund investor Olympians prepare for their very
own opening ceremony, to be held at The Great Court of the
British Museum in London on 3 October, a new mood seems to be
emerging between the different teams: one that is more
collaborative than combative.
Until now, funds of funds have been angered as they saw
investment consultants stealing their medals, in a match with
no umpires to preside over 'fair play'. Some, like Grosvenor
Capital Management and Blackstone Alternative Asset Management,
have retaliated and adopted tactics such as those played at the
Texas Permanent School Fund, where they are offering their
arguably better research, due diligence and monitoring and
reporting services for free (or nearly).
There is evidence, however, that a new team spirit is in the
air. After a decade of dependency, hedge fund investors are
ready to compete on their own. But what many have learned in a
very short space of time is that to excel all good athletes
have a coach or trainer - which is why some of the larger funds
in the US are looking to return to some form of partnership
with specialised funds of funds.
In the UK, in her new role as adviser to Man Group and the
Newham Pension Fund, Judy Saunders, formerly pension chief at
the $13.5 billion West Midlands Pension Fund, is still an
advocate of funds of funds but contends that hedge fund
investing is best used as "a process not an asset class".
It is true that some investors including Lancashire may have
got burned in the past three years and are having a rethink of
their goals. But in the end, liabilities do not go away and the
best solution will be one that preserves capital as well as
enhances it in some way.
Others, like Camden, are trying the single brand of
self-invested hedge fund products of managers like BlueCrest
and Brevan Howard, because at least at the moment their
performance talks louder.
What all hedge fund athletes have to remember is that, like
the Olympics that happens every four years, a lot can change in
the investment review timeframe. Few Olym-pians repeatedly
return more than two or three times; but there is always new,
fresh energised blood to take their place.
The art of hedge fund investing is to realise that it is not
a static game; and investment and allocation fitness is as
important to buying hedge funds as stamina and endurance are in
the Olympic sports.
New hedge funds start up every year and the elite FoHFs,
like trained coaches, are great at spotting and nurturing
talent. For example, Permal, like Tom Daley, continues to dive
into the opportunities pool.
In this issue, our five-year review of the global FoHF
industry proves that this trend is true of the allocators, too:
of the 147 firms that were in the rankings in June 2007, only
78 are still there. It is not the same club, but with 103
members it is clear that new fresh blood is coming in year
after year, with InvestHedge Award contenders The Bornhoft
Group, Persistent Asset Management and Thalia being perfect
examples of this.
The majority of those that are still in the ranking for five
or more years - like Michael Phelps, the most decorated
Olympian of all time with 22 medals to his name - have won many
I wonder if de Coubertin would mind too much if the global
FoHF industry adapted his famous quote: "Hedge fund investing
is not a system but a state of mind."