Next up in our series of notes from the Alpha Hedge West Conference is the panel on hedge fund leaders of the future: the next generation. It featured Michael Sedoy (Kimmeridge Capital), Neal Shah (Valtura Capital), Mike Keough (Racon Capital), John Rende (Copernicus Capital).
The Next Generation of Hedge Fund Managers
In 2012 roughly 1,200 hedge funds tried to start and only 35 had over $100M in AUM.
JR> At Weintraub he did health care and overlaid technical analysis and options.
MK> What learned, what he'd do now: Experienced team of people working together. Underestimated what it meant to create a portfolio from scratch.
Moderator> How about the business side?
MK> Believing you need to have separation between the business side and the investing side.
MS> Has COO. In terms of 3rd parties, has only gold plated servicers.
Moderator>24 of the 35 funds had seed deals. 1.5% and 15% for founder deals.
JR>The founders class is 1% and 15% up to $75M.
MK> Feels good about the economy. Feels next Fed chair will dictate monetary policy for US and World. Likes short volatility and most carry strategies. Higher rates off the table with Summers gone.
NS> Likes some Puerto Rico Munis. Small Market Munis blowing up.
MK> VIX is 4 points over normal historical trend.
MS> Shale. People were doing well during rise in energy prices. Last three years has been becoming about finding high margin energy. North American unconcentrated.
NS> Events they look for are panic. Credit Stress, BK, Spins, Div Cuts, etc. Prefers not to be activist. 95% of the time, mgmt is reasonable. 5% of the time, fixed agent is running cargo for itself.
JR> Old fund had Vol of half the S&P. This new fund will have more. Will use lots of similar tactics.
MK> Weak portfolio that recognizes different asset classes react to volatility. In May he was long copper and short Aussie dollar and Chile Peso. Really likes airline stocks.
What Keeps You Up At Night?
JR> Time horizon different between the investor and fund manager.
MK> Difference between correlation and causality.
NS> Amount of money chasing corporate credit.
Other Comments
NS> Smaller funds can buy cheaper muni issues discounted in Puerto Rico compared to what others would be in bigger funds.
JR> Need to have people feel empowered. Need to have decision capabilities.
Moderator> What is Emerging Manager? Spinoff or Spinout? $1B to $2B in AUM? Minority Owned?
Be sure to check out the rest of our summary of the Alpha Hedge West Conference.
