Absolute Return Symposium 2008
Venue: 583 Park Avenue
Location: At 63rd Street and Park Avenue, New York
Dates: Wednesday, 19 November 2008
Thursday, 20 November 2008
Following the huge success of the 2007 conference, the Absolute Return Symposium 2008 promises to be more impressive than ever, with high-profile speakers, high-quality sessions and high-level delegates that has enabled this to be the industry's leading event for four years.
Click here for more information on the AR Symposium 2011
Speakers at the 2008 Absolute Return Symposium
predict the shape of the industry beyond the bloodbath
Top: Rob Ladd, Jamie Dinan, Paul Touradji, Eric Mindich.
Middle: Melissa Ko, Sandra Manzke, John Paulson, James Chanos.
Bottom: Hal Schroeder, Michael Lewitt, Max Holmes, Peter Thiel.
With all the talk about markets being in the worst shape since the Great Depression, there is one big difference. During the 1930s, there were no hedge funds. As the industry tries to determine what it will look like on the other side of what York Capital Management founder Jamie Dinan calls a watershed year, there's a fair amount of trepidation.
"Baron Rothschild said, 'the best time to buy is when there's blood in the streets,' and the reality is there's a lot of blood in the streets today," Dinan said in his keynote address at the 2008 Absolute Return Symposium. "Unfortunately, it's our blood. And when it's your blood that's flowing, it really makes it a much more difficult proposition."
Such black humor was a set piece at the two-day event. Top managers detailed the lack of leverage available as they debated the merits of investing in distressed assets, while investors complained about not being able to get their money back from hedge funds – and both groups agreed that massive change was coming to the industry, including the likelihood of government regulation.
Managers acknowledged that investor unease was one of the biggest challenges facing the industry, and many said they expect the industry to shrink by significant numbers. At the low end, Paul Touradji, president and chief investment officer of Touradji Capital Management, said there could be as few as 500 hedge funds left standing when the shakeout is over.
That isn't coming anytime soon, according to John Paulson, president and founder of Paulson & Co., who said in his keynote address that he is positioning his funds for further weakness in the stock market. In both 2007 and 2008, two Paulson funds won Absolute Return awards, and Paulson nabbed the Management Firm of the Year Award twice in a row.
In any environment, hedge funds should be able to outperform – and they have. The median return from practically all hedge fund strategies is dramatically higher than their respective benchmarks. For example, the Absolute Return U.S. Equity index was down 13.16% through November, compared with a 38.96% loss for the S&P 500. This performance is even more remarkable because 2008 included four of the worst months ever for hedge fund performance.
Still, in a market environment in which average investors have abandoned the stock market for the safety of FDIC-insured bank deposits, the ability to get your money when you want has taken precedence. The refusal of many managers to return capital to investors has led to what Dinan refers to as a broken covenant between managers and investors. "Any manager who was staying 100% invested in this environment, hoping, praying or not really caring whether he gets redemptions – to me, it's really negligent," he said.
On the bright side, one of the biggest issues facing hedge funds is what looks to be a dearth of leverage in the future – and that could be a good thing. "We see it as a positive development that it's largely an unlevered world," said Tony Lembke, co-chief investment officer at MKP Capital. "The above-market returns we're going to get in credit over the next five to 10 years could be the best in a century. That's how much things have been repriced. And you don't need leverage to get those returns."
Click here to view the summaries of the panels and keynote speeches at the event.