Optima Fund Management 2006

Optima chief assembles hedge fund talent in New York

New York, 4-5 May 2006
Originally published in the May 2006 issue

‘The Art and Science of Hedge Fund Investing’ was the title chosen by Optima Fund Management, for its 2006 Investor Hedge Fund Conference, held at the Waldorf Astoria in New York City on May 4-5, 2006, with sponsorship support from Mellon and HSBC.

The speakers were a select group of people, featuring billionaire financier Carl Icahn, Barry Rosenstein of JANA Partners, Robert Citrone of Discovery Capital, Keith Anderson of BlackRock, Oscar Schafer of O.S.S. Capital Management, Felix Zulauf of Zulauf Asset Management AG and, by recorded video, Kerr Neilson of Platinum Asset Management. The keynote speaker at the dinner held on the evening of the opening day was Tom Wolfe, author and chronicler of the world of high finance.

Thomas Gimbel, Executive Managing Director of Optima, kicked-off proceedings by pointing out that the assembled audience represented over $500bn of investable assets. In addition to university investment officers and representatives of large endowments, he counted 4 U.S. states, 2 sovereign government offices, 11 banks, 9 insurers, 6 charities, 10 pension funds, 44 family offices representatives and 50 recognised individual investors.

The fact that Dixon Boardman, Founder and CEO of Optima and his team – currently managing assets of circa US$6bn – were able to call upon such a high profile group of speakers to present to 300 invited guests – many of them very experienced investors – is a clear indication of the high regard in which Optima is held.

In an upbeat assessment of first quarter developments, Gimbel said the hedge fund industry had seen one of the best first quarter performances since investable indices began in October 2002. For example, the performance of 3.81% for the HFRX Global Hedge Fund Index was second only to the 5.5% of June 2003. Performance by strategy was strong across most sectors, particularly in emerging markets,long/ short equities and convertible arbitrage, but weaker in fixed income and distressed securities.

One of the trends Gimbel picked out was the capacity squeeze resulting from funds closing to capital. This made access to capacity an increasing priority for investors. It is not surprising therefore that in an Optima sample of hedge funds, closed managers have generally higher returns of +5.40%, even in comparison to top tier open managers of +4.73% for 2006 first quarter. Those funds that are closed to all investors have a performance of 5.49% for the 2006 first quarter, 18.40% for the past 12 months and 29.02% for the past 24 months. Funds which were generally open had average returns of +4.73%, +15.99% and +19.81% respectively.

Gimbel also presented some comments on the impact of the new regulations affecting U.S. hedge fund managers with AUM of more than $25m. On the domestic front, the picture that is emerging reveals that some managers are choosing not to register with the SEC, at the expense of their investors’ liquidity ie by imposing lock-ups of 25 months and more: out of 141 managers in Optima’s current “qualified list” sample, only 76 chose to register with the SEC. In addition, ‘hard lock-ups’ are more prevalent: they have grown to 50.4% from 14% of Optima’s sample hedge fund list, highlighting the need for even more thorough due diligence and analysis. One manager has reportedly chosen to sue the SEC, claiming it has over-reached its authority.

For such a New York-focused event, it was interesting that Gimbel should choose to mention the announcement by the UK’s Financial Services Authority to authorise hedge funds for retail investors, probably starting in 2007. The importance of this development lies in the fact that London is the second biggest hedge fund centre in the world, after New York. He added that, although global investing is experiencing a resurgence in Europe, Asia and Latin America, London is growing at the fastest rate in terms of new hedge fund openings.

Perhaps the star guest speaker was the legendary corporate raider Carl Icahn, who spoke about his speciality, event driven and activist investing. His risk arbitrage and options trading business, first established in 1968, has taken substantial and controlling positions in some of the most prominent American businesses, including RJR, Nabisco, TWA, Texaco, Phillips Petroleum and others. But most recently, he has been trying to break up Time Warner, a company that has been having a hard time ever since its merger with AOL.

One of Icahn’s allies in the Time Warner fight was another speaker at the conference: Barry Rosenstein, founder of and managing partner of JANA Partners LLC, who discussed valueoriented, event-driven investing. Rosenstein is also an activist investor, joining forces last year with Christopher Hohn of The Children’s Investment Fund to block Deutsche Borse’s attempted takeover of the London Stock Exchange, prompting the resignation of the deal’s architect, Borse’s chief executive Werner Seifert.

Other prominent speakers were Keith Anderson, vice-chairman of BlackRock, where he is responsible for the firm’s global fixed income strategy, while also being a member of the US Treasury Borrowing Advisory Committee, which advises on the financing and management of the Federal debt; Oscar Schafer, managing partner of O.S.S. Capital Management, and a long-time member of Barron’s Roundtable; and Felix Zulauf, founder and president of the Swiss hedge fund manager, Zulauf Asset Management.

The conference’s four panel discussions featured other big names. The first panel discussion centred on emerging markets and the world’s fastest growing economies. On this panel, moderated by Optima’s Anastasios Adam, were founding partner of Discovery Capital, Robert Citrone, who earned his spurs at Tiger Management and Fidelity; Satyen Mehta, a partner at Neon Liberty; and Francisco Alfaro, managing member of Miura Global Management.

The second panel, moderated by Optima’s Donald Johnston, focused on Optima’s long/ short equity sector funds. The speakers were Wayne Wilkey, founding partner of Ampere Capital, and James Bell, portfolio manager at Lee Munder Investments.

After the luncheon keynote speaker, Lawrence Kudlow and then economist “Woody” Brock, came the third panel, addressing the question of event-driven investing. Moderated by Robert Picard, Optima’s Chief Investment Officer, thediscussion featured Joseph Oughourlian, a portfolio manager at Amber Capital; Philip Falcone, senior managing director of Harbinger Capital, and Barry Rosenstein.

The final panel discussion, moderated by Optima’s John Langeler, dealt with institutional investors in the hedge fund arena. Speakers on this panel were Orin Kramer, chairman of New Jersey State Investment Council; Donald Lindsey, chief investment officer of George Washington University; William Boarman, chairman of the Communication Workers of America and co-chairman of the Council of Institutional Investors; and John Casey, treasurer of the Altman Foundation.

1. Oscar Schafer, O.S.S. Capital Management LP
Dixon Boardman, Optima
2. Tom Wolfe, Author
3. Entrance to Dinner at Mandarin Oriental New York
4. Sir Anthony Bamford, JCB
Dixon Boardman, Optima
5. Eva Jacobi,
Herbert Jacobi, Former Chairman,Trinkaus & Burkhardt
Freddy Melhado, Optima
6. Nick Simunek,
Terry Allen Kramer, Allen & Company
Jose Pepe Fanjul, Flo Sun Inc.
7. Dixon Boardman, Optima
Carl Icahn, Icahn Management LP
8. Thomas Gimbel, Optima
9. Barry Rosenstein, JANA Partners LLC
Thomas H. Lee, Thomas H. Lee Capital, LLC
10. Donald Johnston, Optima
11. Dr. H.”Woody” Brock, Strategic Economic Decisions, Inc.
12. Terry Allen Kramer, Allen & Company
George S. Livanos
13. Conference Audience at the Waldorf Astoria
14. Conference Audience at the Waldorf Astoria
15. Anastasios Adam, Optima
16. Christopher Heath, Optima
Haruo Miyako, Mitsubishi Corporation Capital, Ltd.
17. John Langeler, Optima
John Casey, Altman Foundation
18. Charlotte Beyer, Institute for Private Investors
19. Mark Kaplan, Skadden, Arps, Slate, Meagher & Flom LLP
Thomas H. Lee, Thomas H. Lee Capital, LLC
20. Dixon Boardman, Optima
Nancy Littman, Optima
Freddy Melhado, Optima
Thomas Gimbel, Optima
21. Judith Taubman, The Taubman Company
Arriana Boardman

Second set of images

22. Geoffrey Lewis, Optima
23. Robert Picard, Optima
24. Edgar de Picciotto, Union Bancaire Privee
Dixon Boardman, Optima
25. Tom Wolfe, Author
Arriana Boardman
26. Felix Zulauf, Zulauf Asset Management AG
27. David Knott, D.M. Knott Limited Partnership
Thomas Gimbel, Optima
Frederic Binggeli, Banque Privee Edmond de Rothschild S.A.
28. Orin Kramer, New Jersey State Investment Council
John Gutfreund, C.E. Unterberg, Towbin
29. Jose Maria Trullols, Optima
30. Lita Livanos, Stavros Livanos
and Marina Livanos
31. Carl Icahn, Icahn Management LP
32. Larry Kudlow, Kudlow & Co., LLC
33. Shiv Srinivasan, Optima
34. Graham Martin, Optima Investment
Management (Europe) Limited
35. Clockwise from top left:
Paul Smith, HSBC Alternative Fund Services
Bill Thomson, Former Chairman, Bank of Bermuda
Joost Baartmans, Cartim Consultants
Peter Pritchard, Pritchard Industries
Nick von Speyr, Optima
36. Dinner at the Mandarin Oriental New York
37. Robert Citrone, Discovery Capital Management, LLC