Pension Awards Aksia Lucrative AssignmentPension consultant Aksia has emerged as the winner among 10 or so firms that

sought to advise Pennsylvania Public School Employees on nearly $5 billion ofhedge fund investments.

Market players said the assignment could be the largest hedge fund mandatefrom a public pension so far this year. The Pennsylvania system has a $4.7 billionallocation for hedge funds, including $1.2 billion that hasn’t yet been invested.

Until now, the pension had relied on general consultant Wilshire Associates toadvise it on hedge fund allocations. But after the pension’s board bumped up theallocation for hedge funds in March to 10%, from 7.5%, the investment staff decid-ed it was time to hire a specialist.

In response to a request for proposals, as many as 10 advisory shops — includingAlbourne America and Cliffwater — submitted bids to Pennsylvania Public SchoolEmployees by the April 5 deadline. The pension is expected to sign a contract with

See AKSIA on Page 8

More Managers Saying ‘No’ to New InvestorsAdd Baupost Group, Louis Dreyfus, Mason Capital and Two Sigma to the list of

large hedge fund operators that have cut off new investments amid a turnaroundin the fund-raising market.

In some cases, including Baupost and Mason, the firms are closing windowsthey had opened in the aftermath of the market crisis in late 2008, when investorscollectively withdrew tens of billions of dollars from hedge funds. In other cases,managers are barring new investors because their funds are just now reachingcapacity. Jeffrey Altman’s Owl Creek Asset Management, for example, plans to stopaccepting new investors when its Owl Creek funds reach a combined $7.5 billionto $8 billion — something investors expect to happen by the end of September.

The fact that a growing number of fund operators are now turning away investorsis further evidence of the industry’s dramatic rebound since hitting bottom around

See MANAGERS on Page 13

Blackstone Wins Mandate From NY Pension New York Common Fund is set to tap Blackstone Group to take the lead role in

managing a planned $200 million allocation to emerging hedge fund managers.The $130 billion pension system has spent about a year mapping a plan to invest in

up-and-coming managers as part of its broader hedge fund portfolio. Pension officialsinitially considered about 20 alternative-investment firms for the management assign-ment, then narrowed the field to three major players: Blackstone, Protege Partners andSkyBridge Capital. In recent days, Blackstone emerged as the winner, along with anundisclosed, but much smaller, asset manager that will play a supporting role.

Even before giving Blackstone its marching orders, New York Common Fundalready is laying the groundwork for its next hedge fund program — a plan to allo-cate $300 million of seed investments to startup managers.

Overseeing both efforts is Peter Carey, a former Bear Stearns executive who washired by the pension in 2007 to restructure its hedge fund investments. Carey and

See BLACKSTONE on Page 14

2 Lyrical Builds Portfolio of Seed Deals

3 Seasons Considers Closing Its Doors

3 Little Work for Plainfield Marketer

3 Brevan Pitches Commodities Vehicle

4 CFTC Constructs Trading ‘Watch Room’

6 Industry Preps for Swaps Regulation

8 Merlin Adds Salesman in Greenwich

8 Madrid Firm Preps Event-Driven Fund

10 Wolf River Signs Placement Agent

10 Visium Replicates Healthcare Vehicle

10 Goldman: Q1 Launches Top 2009 Sum

MAY 12, 2010

Gopi Karunakaran is joining TricadiaCapital’s London office next month asthe third member of its credit-invest-ment team. He is moving over fromJames Caird Asset Management inLondon. New York-based Tricadia, with$2.5 billion under management, wasfounded in 2003 by Michael Barnes andArif Inayatullah. Tricadia CDOManagement, also led by Barnes andInayatullah, has another $2.3 billionunder management.

Former Bank of America executiveChristopher Hayward stepped into thenewly created chief financial officer’sslot at Highbridge Capital this week.Hayward was previously chief operatingofficer of the global equities division ofBofA’s Merrill Lynch unit, and held vari-ous senior leadership positions over a13-year career there. His focus at expan-sion-conscious Highbridge is on newproducts and strategies. The J.P. Morgan

THE GRAPEVINE

See GRAPEVINE on Back Page

Lyrical Builds Portfolio of Seed DealsJeffrey Keswin’s Lyrical Partners has been quietly seeding

hedge fund managers at a rate of nearly one per year over thepast six years or so.

Most recently, the New York firm provided an undisclosedamount of seed capital for Solas Capital of New York — bring-ing to five the number of firms Lyrical has backed since 2004.The amounts and terms of the seed investments are unclear,but the deals presumably given Lyrical an equity stake in themanagement firms.

Lyrical is mum about the timing of its next deal, though

based on its progress so far, the firm could make another seedinvestment later this year or early next year. Lyrical is drawn tomanagers that share Keswin’s core interest in value equityplays.

Keswin started Lyrical in 2004 after leaving GreenlightCapital, a $6 billion hedge fund operator he co-founded withDavid Einhorn. Lyrical’s main business is running long/shortequity investments via hedge funds and managed accounts.The firm has about $750 million under management, notincluding its portfolio of seed investments.

The Solas deal, completed earlier this year, was Lyrical’sfirst seed investment since the financial crisis. Solas was co-

founded by Tucker Golden andAnand Atre. Golden previouslyworked at hedge fund operatorIvory Capital of Los Angeles, whileAtre came from leveraged-buyoutfirm Kohlberg Kravis Roberts.

In 2005, Lyrical provided seedmoney for the launch of two man-agers: SoundPost Partners and OakStreet Capital. New York-basedSoundPost was founded by JaimeLester, who previously worked atseveral hedge funds, including J.L.Advisors and Trellus Management,both of New York. Oak Street,based in Chicago, was founded byDavid Makula, who got his start atCoghill Capital of Chicago.

Lyrical’s initial seed deal waswith Voyager Capital, a Mumbaifirm founded by Shiv Puri. He pre-viously worked for BrooksideGroup, a Greenwich, Conn., assetmanager specializing in real estateand infrastructure.

Lyrical’s only other seed dealwas a 2007 investment in an undis-closed manager that returned themoney after failing to stay withinthe parameters of its risk profile. v

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Seasons Considers Closing Its DoorsSeasons Capital, a $700 million technology-stock fund

manager, was hit with heavy redemption requests at the end ofthe first quarter, prompting founder Ravi Kaza to considerthrowing in the towel.

Indeed, some market players said the San Francisco firm isin the process of shutting down. One person familiar withSeasons said the staff gathered at a San Francisco bar on April30 to say good-bye. Others, however, said Kaza hasn’t yetdecided whether to shutter the firm. A Seasons spokespersonsaid the firm does not comment on “rumors and speculation.”

The firm, which Kaza founded in 2003, managed around $1billion at its peak last year. Following the first-quarter with-drawals, Seasons had $700 million under management in fourvehicles, according to an April 21 SEC filing.

What prompted the redemptions isn’t clear, though Seasonshas had some performance issues during the past year. SeasonsCore Leveraged Fund gained 9.7% during the first 10 monthsof 2009, well below the 46.9% gain for the Nasdaq 100 index.In 2008, the fund lost 18%, which was significantly better thanthe 41.6% loss posted by the Nasdaq 100.

The three other hedge funds run by the firm are SeasonsPinnacle, Seasons Core Fund and Seasons Aggressive. v

Little Work for Plainfield Marketer Plainfield Asset Management has relegated its marketing

chief to a part-time position — further evidence that the once-$5 billion hedge fund manager is in retreat.

Georges Holzberger, who joined Plainfield as head of mar-keting in 2005, has been working on a part-time basis forabout a month now. Though the firm declined to comment, itseems clear that Plainfield will be doing little if any fund rais-ing for the foreseeable future.

That’s because the Stamford, Conn., firm is fully focused forthe time being on liquidating more than $3 billion of assets tomeet redemption requests from increasingly impatientinvestors. It also is under investigation by the ManhattanDistrict Attorney’s Office.

Plainfield, a distressed-debt specialist headed by D.E. Shawalumnus Max Holmes, managed some $5.5 billion at its peak.But after financial markets collapsed in late 2008, investorslined up to redeem en masse. Since then, Plainfield has beenstruggling to unwind $3.3 billion of illiquid investments. Thefirm, which still has a staff of 67, continues to manage about$500 million for remaining investors.

Earlier this year, the firm moved its headquarters fromGreenwich, Conn., to a smaller disaster-recovery site inStamford. In January, Plainfield disclosed that it was beinginvestigated by the Manhattan D.A. on suspicion of predatory-lending practices.

The firm also was locked in a dispute with the developer ofa resort in the Bahamas. But last month, an arbitration panelresolved the matter in Plainfield’s favor. Florida developer

Robert Stein had accused the hedge fund firm of breach of con-tract for its role in financing the development, called SouthOcean. The project got under way in August 2007, just as thecredit markets were about to crash. The arbitration panel dis-missed all of Stein’s complaints against Plainfield. v

Brevan Pitches Commodities VehicleBrevan Howard Asset Management is placing a big bet on

commodities.Within the past two weeks, the $28 billion manager began

marketing Brevan Howard Commodities Strategies MasterFund after committing $200 million of seed capital for thelaunch. Brevan Howard has long maintained a commodities-trading desk for its other hedge funds, but this is its first dedi-cated managed-futures vehicle. The fund will take a relative-value and macro-directional approach to investing in optionsand futures across the commodities spectrum, with a focus onenergy, metals and agriculture.

Why now? According to the fund’s marketing documents,the London firm is “bullish on the long-term outlook for com-modities due to absolute global growth, especially in emergingmarkets, and significant demographic developments.”

Overseeing the new fund is Stephane Nicolas, a partner inthe London headquarters. He attracted the attention ofinvestors as head of Brevan Howard’s commodities-tradingdesk, where he is responsible for energy, metals and agricul-tural investments for the flagship Brevan Howard MasterFund. Before joining the firm, Nicolas ran Bank of America’senergy-options desk from 2001 to 2004.

The minimum investment for the commodities fund is $1million, though Brevan Howard simultaneously is setting up apair of feeder funds that will allow investors in for as little as$100,000.

Investors who’ve caught wind of the new fund say BrevanHoward’s impressive track record over the years will likely gen-erate strong demand, though some cautioned that the firmmay be seen as straying into too many niche strategies. Inaddition to the master fund, Brevan Howard manages an Asia-focused hedge fund and an emerging-markets vehicle, amongothers.

“Long-term, they’re spectacular,” said an investor in theflagship fund. “Near-term, they’re like a lot of people: Theyget big — really, really big — and then they’re good but notas spectacular anymore. They’ve lacked the discipline toturn money away. Things get harder to manage, returns godown.”

In March, Brevan Howard restructured a bond fund thathad failed to gain much traction after launching last year. Thefirm told investors via e-mail that it planned to shift the strat-egy of Absolute Return Bond Plus Fund so it would be “moreclosely aligned with the core investment exposures” of the flag-ship fund. Launched last year with $250 million, the bondfund had just $287 million of assets as of Jan. 29 — a sign ofweak investor demand. v

May 12, 2010 3Hedge Fund ALERT

May 12, 2010 4Hedge Fund ALERT

CFTC Constructs Trading ‘Watch Room’The Commodity Futures Trading Commission is moving

ahead on several fronts to more closely monitor the activitiesof high-frequency traders of commodities.

For the past several months, several CFTC commissionershave been quietly meeting with executives from some of thelarger high-frequency commodity shops, including Getco ofChicago, to gain a better understanding of their trading strate-gy and how it impacts the market as a whole.

“They are in and out of markets in seconds,” said commis-sioner Bart Chilton. That can be a problem, he said, because the

technology allows these traders to buy and sell in market-mov-ing volumes, and regulators currently have no way to monitorthe trading activity in real time.

To that end, the CFTC is developing a “watch room” to stayabreast of high-frequency trading. The facility is set to go liveby yearend.

Two key areas regulators need to pay more attention to,Chilton said, are the algorithms high-frequency players use toprocess market data and make their trades, and the advantagessome firms gain via their close proximity to the majorexchanges. By locating near an exchange, a trading desk canshave milliseconds off its execution times.

Questions about the role ofhigh-frequency trading in generalgained fresh urgency on May 6,when the Dow Jones IndustrialAverage suddenly plummeted byhundreds of points. Some marketwatchers blamed high-frequencytraders for the historic sell-off,while others said the “flash crash”occurred because such traderswere briefly sidelined. In any case,the SEC, stock exchanges andCongress are among those explor-ing what role, if any, high-frequen-cy traders played in the marketgyrations last week. v

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Industry Preps for Swaps RegulationCongress finally is about to have its way with the derivatives

market, but by all accounts hedge fund managers are well posi-tioned to deal with the looming regulatory changes.

By the end of this month, the U.S. Senate is expected to voteon a package of financial-crisis reforms that, among otherthings, would require most swaps trades to be processed bycentral clearing houses. No more scribbling a few numbers ona scrap of paper and shoving it into a drawer: From now on,derivatives traders will have to record their deals electronical-ly and route the transactions to clearing houses and industrydatabases.

But industry experts point out that many of the biggesthedge fund managers that are active in the derivatives mar-ket have already modernized their trade processes and begunrouting transactions through central clearing houses. ICETrust, a swaps clearing house launched last year byIntercontinentalExchange of Atlanta, so far has cleared only$700 million of credit-default swaps for hedge fund man-agers — but some $8 trillion of CDS overall. At the sametime, most market players, including fund managers, are nowreporting their positions to the Depository Trust ClearingCorp., which last year set up a data warehouse to track cred-it-default swaps. Depository Trust now claims to be recording97% of all CDS trades worldwide.

The latest big-name manager to modernize its deriva-tives-trading business is BlueMountain Capital of New York.Last month, the Swedish technology firm TriOptimaannounced that it had sold its trade-reconciliation product,triResolve, to the $4 billion fund operator. The technologyallows banks and their counterparties to automatically rec-oncile swap trades.

In a March 1 letter to the Federal Reserve Bank of New York,a group of leading market players, including BlueMountain,Citadel, D.E. Shaw and Goldman Sachs Asset Management,wrote that the industry had made significant progress towardthe goal of clearing, warehousing and reconciling derivativestrades.

“This is just the way the market has been moving,” said anindustry expert who is involved in the negotiations betweenlawmakers and market players over regulatory reform. “Manydealers are telling counterparties they will no longer acceptpaper confirmations or novations. Regulators are currentlymonitoring industry participants’ swap activities, sure, but themarket is now self-enforced.”

Industry efforts to increase transparency and reduce risk inthe derivatives market began in 2006, but gained speed afterfinancial markets collapsed in late 2008. If the industry’s orig-inal impetus was to avoid regulation, that’s no longer the case— for the simple reason that greater regulation is now seen asinevitable.

Even as some politicians have slammed the derivativesindustry for contributing to the financial crisis, regulators haveacknowledged the industry’s ongoing efforts to modernize itstrading systems. A March report by two Fed staffers and aStanford University professor, Darrell Duffie, cited majorimprovements in trading infrastructure since 2005. Still, thereport said beefed-up regulation is needed to press still moretrades into clearing houses.

“All these industry commitments to do things voluntarilyhave not staved off regulation, but the blow will be somewhatsoftened by the amount of work that has been done already,”said John Burchenal of technology firm Omgeo, whoseCrossCheck product provides reconciliation, settlement andcollateral-management services for derivatives traders. v

CorrectionsA May 5 item in The Grapevine column incorrectly reportedthat Christopher Hagstrom gave up his job as global co-head ofsecurities lending at UBS to fill a vacancy left by MichaelKelleher, who had been head of U.S. securities lending beforeleaving UBS for a new job. Hagstrom is assuming Kelleher’sduties, but will retain the title of global co-head of securitieslending.

A May 5 article, “Seeding Vehicle Gearing Up for More Deals,”incorrectly reported that PineBridge Investments is a unit ofAIG. On March 29, the insurance giant closed on its sale of thebusiness to Pacific Century Group. v

May 12, 2010 6Hedge Fund ALERT

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Merlin Adds Salesman in GreenwichMichael Porricelli joined Merlin Securities this week as a

vice president of sales in the prime broker’s new Greenwich,Conn., office.

His duties include marketing both prime services and relat-ed technology products, such as risk-management tools. Hereports to Ron Suber, global head of sales for the mid-tier bro-kerage.

Porricelli arrives at Merlin from Bloomberg, where he was aregional sales specialist working with 500 hedge funds inConnecticut and other parts of New England. He has 11 yearsof experience selling software to fund managers.

Merlin added two other staffers this week, raising its over-all headcount to 85.

David Miller joined as a vice president for client services inthe firm’s New York office. He previously was head of clearingand client services at Goldman Sachs Execution and Clearing,which provides prime-brokerage services to many ofGoldman’s smaller hedge fund clients.

Also, Lydia Bell was hired as an associate in Merlin’s capital-introduction group in New York. She previously held a similarrole in Morgan Stanley’s prime-brokerage operations.

Merlin is headquartered in San Francisco, though two-thirdsof its staff works in New York. In addition to the new Greenwichoutpost, the firm has offices in Boston and Chicago. v

Madrid Firm Preps Event-Driven FundCygnus Asset Management, one of Spain’s leading hedge

fund operators, is teeing up an event-driven fund. The vehicle, dubbed Europa Event Driven, is expected to

launch next month with portfolio manager Jose Luis Perez atthe helm. He joined the Madrid firm earlier this year after co-managing his own hedge fund, Shelter Island Offshore Fund,from 2002 to 2008. During that span, Perez and his formerpartner, Luis Arenzana, chalked up some impressive returns,including a 27.5% gain in 2006.

A derivatives and arbitrage specialist, Perez will target merg-ers, spin-offs, restructurings, debt exchanges, regulatory changesand other events impacting equity and debt securities acrossEurope. His trading activity is expected to be driven by a wave ofEuropean corporate refinancings between now and 2013.

The planned launch comes as event-driven managers gener-ally are enjoying more success than at any time since before thecredit crisis. Through April of this year, event-driven funds havegained an average of 7.3%, outperforming all other strategies,according to the Credit Suisse/Tremont Hedge Fund Index. AndHedgeFund.net reports that event-driven operators have raisedmore capital than any other strategy during the past year.

Perez is shooting for annual returns of up to 25% throughan array of special-situation, distressed-credit and long/short-equity plays. The fund is expected to have as many as 40 equi-ty positions and up to 30 credit bets. Some of Perez’s formerinvestors at Shelter Island Capital are expected to follow him to

Cygnus.Perez and Arenzana shuttered their Madrid firm in 2008, at

a time when many investors were fleeing hedge funds general-ly and event-driven managers in particular. Before setting upShelter Island, Perez ran HVB Group’s risk-arbitrage and equityproprietary-trading businesses in Madrid. He previously ledBanco Santander’s equity-derivatives trading business.

Cygnus was founded in 2006 by chief executive Isabel Serra,investment chief Juan Cruz and Jose Maria Amasategui. It wasthe first Spanish hedge fund operator sanctioned by the coun-try’s financial regulator, Comision Nacional del Mercado deValores.

Today, Cygnus manages some $600 million of assets forinvestors around the world. The firm, with a staff of 14, is bestknown for its flagship long/short equity portfolio, whichfocuses on utilities, infrastructure and renewable energy. Theportfolio has generated average annual returns of 15% over thelast four years. v

Aksia ... From Page 1

New York-based Aksia in the coming weeks. Market players saidthe firm, founded by Credit Suisse alumnus Jim Vos, likely nego-tiated a fee in the $5 million-$10 million range.

“It’s a big chunk of business,” one market player said.The pension, which has $46.7 billion of total assets, has

concentrated its hedge fund investments in global-macro,long/short equity and currency vehicles. BridgewaterAssociates and Brevan Howard Asset Management are amongthe fund managers currently working with the pension.

Pension officials drove a hard bargain with Aksia, accordingto a person familiar with the arrangement. “They wanted notone but two dedicated people for the account,” he said.

Vos founded Aksia in 2006 to advise pensions and otherasset managers solely on hedge funds and funds of funds. Thefirm typically begins working with a pension only after itdecides on a specific amount to allocate for alternative invest-ments. Aksia currently advises on $25 billion of hedge fundassets, up from $20 billion last year. Half of the firm’s clientsare pension funds, which allocate an average of $800 million tohedge funds.

The business of advising pensions on hedge fund invest-ments is expected to grow dramatically during the next fewyears. Some market players predict public pension systems willdouble or triple their hedge fund allocations, on average, overthe next five years. v

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Wolf River Signs Placement AgentWolf River Capital has hired marketing firm Ridgeway

Capital to pitch a planned $100 million hedge fund thatwould invest in collateralized debt obligations.

Wolf River Master Fund 2, expected to launch in the sec-ond half of 2010, would buy CDOs backed by trust-preferredshares, a hybrid security typically issued by banks and insur-ance companies. The second fund in the series is expected tohave a more actively traded portfolio than the debut vehicle,which launched in October 2009.

New York-based Ridgeway, headed by Judd Nydes, willpromote Wolf River to prospective investors during a three-week road show scheduled to kick off next week in NewYork, followed by stops in Dallas, Chicago and Los Angeles.Wolf River’s executives will take part in the promotionaltour.

Ridgeway currently has marketing assignments from fiveother hedge funds. Its business is split 80/20 between hedgefund managers and private equity firms.

Wolf River, of Southaven, Miss., was founded in 2008 bythe four founding members of the structured-finance groupat FTN Financial, including Jim Wingett, Dave Howe and DougDuncan. Wolf River currently has about $64 million undermanagement. At FTN, the team worked with communitybanks and smaller insurers to issue trust-preferred shares.The firm underwrote deals for more than 1,000 banks and150 insurance companies, structuring and distributing $21billion of collateralized debt obligations.

In marketing Wolf River Fund 2, Ridgeway is playing upthe fact that CDOs backed by trust-preferred shares are sell-ing at discounts that exaggerate the underlying risks of thesecurities. The fund will invest in both the senior and mez-zanine tranches of such deals, with a focus on issuers thatare under the radar of most investors. Wolf River’s man-agers, by comparison, can claim to be intimately familiarwith both the original issuers and the structures of theirdeals. v

Visium Replicates Healthcare VehicleVisium Asset Management is getting ready to launch a new

version of its flagship healthcare fund, which stopped accept-ing new investments in March.

Like the now-closed Visium Balanced Fund, the new vehi-cle, dubbed Visium Institutional Partners, will target thestocks of pharmaceutical, biotechnology, medical-device andtechnology companies. The key difference: VisiumInstitutional will be limited to companies with market capi-talizations of at least $1 billion. Visium Balanced Fundinvested in both small- and large-cap companies. Also, whilethe original fund had limited exposure to credit instruments,Visium Institutional will be a pure equity vehicle.

The new fund is expected to begin trading on June 1 and,based on current investor interest, reach its capacity of $500

million of capital by yearend. The strong demand is beingdriven, in part, by the performance of the predecessor vehi-cle. Visium Balanced Fund is up roughly 16% this yearthrough April, building on last year’s 23.5% gain. Since itsinception in April 2001, the fund’s only down year was 2008,when it lost 14%. Still, that was better than the industry-aver-age loss of 19% that year. The fund has about $1.6 billionunder management, accounting for the lion’s share of thefirm’s total assets.

Another thing the new fund has going for it: Earlier thisyear, Visium hired Jason Huemer as head of marketing. From2005 to early 2009, he was in charge of marketing andinvestor relations at SAC Capital, where he helped raise $6 bil-lion.

Visium Institutional is expected to be a broad-based fundwith as many as 90 long positions and 70 short ones. Theminimum investment is $5 million, and investors will beallowed to withdraw quarterly with notice of 60 days.

Jacob Gottlieb, who founded Visium in 2005, will overseethe new fund with help from six portfolio managers andother investment staffers. The firm has an overall staff of 45.A physician by training, Gottlieb started Visium by spinningoff a portfolio from Balyasny Asset Management that he hadbeen running since 2001. He previously worked as a buysidepharma and biotech analyst at Sanford Bernstein.

In addition to the Balanced Fund, the firm managesVisium Credit Opportunities, a long/short credit healthcarefund, and Visium Global, a diversified multi-strategy fundthat launched earlier this year. v

Goldman: Q1 Launches Top 2009 SumGoldman Sachs’ prime-brokerage unit handled 48 hedge

fund launches during the first quarter — a marked increaseover last year’s pace.

For all of 2009, Goldman’s hedge fund clients launched atotal of 90 vehicles. Goldman disclosed the figures during aconference call with clients about two weeks ago. Some inter-preted the first-quarter number as a clear sign that the hedgefund industry is well on its way to recovery following the mar-ket debacle of 2008.

Goldman executives said the most popular strategyamong the recent launches has been long/short equity, withmuch of the new capital being diverted from long-onlyinvestments. The average launch size during the first quar-ter: about $50 million.

In addition to long/short equity, Goldman expects emerg-ing-market vehicles and managers focused on Asia to attractan increasing share of hedge fund capital this year.

Goldman’s data is in line with that of other industry track-ers, which have seen steady growth in the number of hedgefund launches since early 2009. According to Hedge FundResearch, 230 funds launched during the fourth quarter of2009, versus 165 wind-downs — marking the second straightquarter in which more funds launched than shut down. v

May 12, 2010 10Hedge Fund ALERT

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Boldt Starts Firm to Outsource CIO Function

Bob Boldt, former head of University of Texas Investment, has started an busi-

ness through which he will perform the functions of a chief investment officer for

foundations and endowments.

Boldt, who left the Austin, Texas, endowment manager in September, has been

approaching prospective clients over the last three or four weeks.

The yet-to-be-named startup, run by Boldt and an unidentified partner, is tar-

geting foundations and endowments in the U.S. and abroad with assets of up to $2

billion. The firm will also offer its services to wealthy individuals.

Boldt wants to serve as an investment-manager-for-hire to clients that aren’t big

enough to build a major investment operation on their own. Down the road, Boldt

also hopes to add investment products for pension plans.

He has a compelling story to tell. In 2002, he became chief executive of the Texas

See BOLDT on Page 6

More Changes Afoot for Bear’s Brokerage

Bear Stearns has ruffled feathers among its staffers with the latest steps it has

taken to overhaul its prime-brokerage unit.

On Friday, the bank informed five of its seven “calling officers” of their

expanded roles: hawking Bear’s securities-lending, financing and conventional

clearing services to prospective hedge fund clients. Until now, those staffers had

been helping hedge funds deal with problems or find their way around the

investment bank when they needed services outside of the prime-brokerage

area.The move is one of a number of changes the bank has made since merging its

equity-derivatives and clearing groups with its traditional stock-lending area in

September. In November the president of Bear Stearns Securities, Richard Lindsay,

resigned as the bank’s revenue growth from its clearing operations began to slow

See BEAR on Page 6

IRS Gives Non-Profit Fund Investors a Break

The IRS delivered some good news last month to non-profit investors in hedge

funds.At the end of January, the agency reported that a tax-exempt entity would not

be penalized for being an investor in a hedge fund that engaged in what the IRS

considers prohibited tax shelters. The possibility that such investors could be held

liable for the actions of their hedge funds’ managers was raised by legislation that

was signed into law in May.

The Tax Increase Prevention and Reconciliation Act was intended to target non-

profits that collected fees in return for helping taxable entities defer income until

it could be reported at a lower tax rate. But before the January clarification by the

IRS, the law seemed to leave the non-profit investors in hedge funds open to scruti-

ny, and threatened to force them to file disclosure statements with the IRS about

their investments.

The agency’s pronouncement came a couple of months after it issued a ruling

See IRS on Page 4

3 Soros Alum Targets Illiquid Holdings

3 Funds Become Major CMBS Buyers

3 UK Firm Preps Liquid Alternative

4 Healthcare Fund Tally Rose in ’06

4 Ex-Level Global Pro Plans Incubator

4 Deloitte Examining Zwirn’s Books

6 Ex-Goldman, E&Y Pros Set to Launch

9 Commerzbank Crafting Suite of Funds

9 Securitization Vets Start CDO Fund

10 CALENDAR

11 LATEST LAUNCHES

FEBRUARY 14, 2007

Two marketers have left Lehman

Brothers’ absolute-return strategies

group, which recently saw changes in

the senior management and structure of

its hedge fund business. The resignation

of Anne Popkin, head of North American

marketing and client services, takes

effect Feb. 28. Marketer Jose Claxton has

also left the firm. Their exits follow the

departure of Lehman’s fund-of-funds

chief Jolyne Caruso in November and

the arrival a few weeks later of George H.

Walker 4th, the former Goldman Sachs

executive who heads Lehman’s invest-

ment-management area.

New York fund operator Anchorage

Capital has hired Natalie Birrell as its

chief operating officer. She joined the

$2.5 billion firm this month to help stan-

dardize its operations. Birrell oversees all

THE GRAPEVINE

See GRAPEVINE on Back Page

Boldt Starts Firm to Outsource CIO FunctionBob Boldt, former head of University of Texas Investment, has started an busi-

ness through which he will perform the functions of a chief investment officer for

foundations and endowments.Boldt, who left the Austin, Texas, endowment manager in September, has been

approaching prospective clients over the last three or four weeks.

The yet-to-be-named startup, run by Boldt and an unidentified partner, is tar-

geting foundations and endowments in the U.S. and abroad with assets of up to $2

billion. The firm will also offer its services to wealthy individuals.

Boldt wants to serve as an investment-manager-for-hire to clients that aren’t big

enough to build a major investment operation on their own. Down the road, Boldt

also hopes to add investment products for pension plans.

He has a compelling story to tell. In 2002, he became chief executive of the TexasSee BOLDT on Page 6

More Changes Afoot for Bear’s BrokerageBear Stearns has ruffled feathers among its staffers with the latest steps it has

taken to overhaul its prime-brokerage unit.On Friday, the bank informed five of its seven “calling officers” of their

expanded roles: hawking Bear’s securities-lending, financing and conventional

clearing services to prospective hedge fund clients. Until now, those staffers had

been helping hedge funds deal with problems or find their way around the

investment bank when they needed services outside of the prime-brokerage

area.The move is one of a number of changes the bank has made since merging its

equity-derivatives and clearing groups with its traditional stock-lending area in

September. In November the president of Bear Stearns Securities, Richard Lindsay,

resigned as the bank’s revenue growth from its clearing operations began to slowSee BEAR on Page 6

IRS Gives Non-Profit Fund Investors a Break The IRS delivered some good news last month to non-profit investors in hedge

funds.At the end of January, the agency reported that a tax-exempt entity would not

be penalized for being an investor in a hedge fund that engaged in what the IRS

considers prohibited tax shelters. The possibility that such investors could be held

liable for the actions of their hedge funds’ managers was raised by legislation that

was signed into law in May.The Tax Increase Prevention and Reconciliation Act was intended to target non-

profits that collected fees in return for helping taxable entities defer income until

it could be reported at a lower tax rate. But before the January clarification by the

IRS, the law seemed to leave the non-profit investors in hedge funds open to scruti-

ny, and threatened to force them to file disclosure statements with the IRS about

their investments.The agency’s pronouncement came a couple of months after it issued a rulingSee IRS on Page 4

3 Soros Alum Targets Illiquid Holdings3 Funds Become Major CMBS Buyers3 UK Firm Preps Liquid Alternative4 Healthcare Fund Tally Rose in ’064 Ex-Level Global Pro Plans Incubator4 Deloitte Examining Zwirn’s Books6 Ex-Goldman, E&Y Pros Set to Launch9 Commerzbank Crafting Suite of Funds9 Securitization Vets Start CDO Fund10 CALENDAR11 LATEST LAUNCHES

FEBRUARY 14, 2007

Two marketers have left LehmanBrothers’ absolute-return strategiesgroup, which recently saw changes inthe senior management and structure ofits hedge fund business. The resignationof Anne Popkin, head of North Americanmarketing and client services, takeseffect Feb. 28. Marketer Jose Claxton hasalso left the firm. Their exits follow thedeparture of Lehman’s fund-of-fundschief Jolyne Caruso in November andthe arrival a few weeks later of George H.Walker 4th, the former Goldman Sachsexecutive who heads Lehman’s invest-ment-management area.

New York fund operator AnchorageCapital has hired Natalie Birrell as itschief operating officer. She joined the$2.5 billion firm this month to help stan-dardize its operations. Birrell oversees all

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ComingSee itComingSee it

Fund Finances Equipment DealsA Florida businessman has started a hedge fund in an effort

to tap new sources of capital for his equipment-leasing busi-ness.

Express Business Finance of Miami launched the asset-based lending vehicle about a month ago with up to $10 mil-lion of capital from founder Arjun Saluja, as well as his familyand friends. Saluja, who serves as portfolio manager, expectsto begin marketing Monarch Equipment Leasing Fund to out-side investors by yearend.

Saluja plans to use the capital to help expand The LeasingExperts, a Miami firm that finances major commercial-equip-ment deals. Saluja’s clients include hotel chains that buy largequantities of televisions and mattresses. He also finances thepurchase of radiological equipment by medical practices andgasoline pumps by service stations.

The hedge fund would provide Saluja with an alternative tobank loans and other sources of financing. The fund, whichtargets a 9-11% return, charges a 2% management fee and 10%performance fee. Although other terms are still being final-ized, Saluja expects to impose lockups of up to three years onlarge investors, but not on smaller ones. v

Managers ... From Page 1

the end of 2008. As a rule, the biggest beneficiaries have beenlarge managers that continued to perform well during the finan-cial crisis or at least resisted the temptation to suspend or limitwithdrawals when investors needed their money most.

Louis Dreyfus’ LD Commodities Alpha Fund will effective-ly stop accepting capital as of June 30, opening for new invest-ments only with permission from its board of directors. Thefund, which launched at the end of 2008, topped $1 billion forthe first time on April 1. The Paris firm also launched a morehighly leveraged version of the fund on April 1, though it’sunclear if that vehicle will remain open after June 30. LDCommodities, managed by Ian McIntosh in Geneva, is one oftwo hedge funds the firm runs. The other is LDH EnergyOpportunities Fund, which Louis Dreyfus co-manages withHighbridge Capital.

Mason, a $5 billion event-driven shop, closed its door tonew investors in the first quarter. The New York firm, headedby Michael Martino and Kenneth Garschina, had been closed to

new investors before the financial crisis, then re-opened inJanuary 2009. The fund posted a 25.7% gain last year.

New York-based Two Sigma, a $4 billion quantitative-investing shop, is shutting off its Compass global-macro fundto new investments on June 1. The firm’s founders, JohnOverdeck and David Siegel, initially opened the vehicle to out-side investors around May 2009. By May 1, 2010, it hadreached $989 million, following returns of 20.4% in 2009 and5% this year through April. The fund is managed by Ken Baron.

Baupost, a multi-strategy fund shop headed by SethKlarman, had been closed to new investments prior to the mar-ket meltdown in 2008. The Boston firm then selectivelyopened for certain types of limited partners. But in a letter toinvestors around yearend, Klarman said he was shutting thedoor once again — and may even insist on returning someinvestors’ capital this year. Baupost has produced an averageannual return of about 17% over the past decade by targetingcorporate spinoffs and reorganizations, bank debt, commercialmortgage-backed securities, real estate and private equity. TheBoston firm has an estimated $18 billion under management.

Owl Creek, an event-driven manager based in New York, hasattracted investors with consistently strong returns. Its OwlCreek Overseas Fund gained 21.4% in 2006, 32.4% in 2007,21.8% in 2009 and 5.1% for the first month of 2010. It lost10.3% in 2008, when the average hedge fund fell about 19%.The firm, which employs an investment team of 23, currentlyhas $6.5 billion under management — $1 billion to $1.5 billionshy of its self-imposed cap.

Jerome Simon’s Lonestar Capital of San Francisco effective-ly shut down in 2008, returning capital to outside investorsbecause Simon didn’t like the market environment. He re-opened to outside investors last year, but within a few monthscapped his fund at between $750 million and $1 billion —despite the fact that he requires a 10-year lockup.

Elliott Management, Paul Singer’s $16.7 billion distressed-credit hedge fund firm, is expected to cut off new investmentsaround midyear. The onshore Elliott Associates fund and anoffshore version, Elliott International, technically have beenclosed since a 2008 capital call reaped $3 billion that hadalready been committed by investors. But the firm has beendrumming up fresh capital commitments this year, primarilyfrom existing investors. Following a capital call in the next cou-ple of months, Elliott will again be closed to new investments.Going into 2010, the firm was looking to raise $2 billion. v

May 12, 2010 13Hedge Fund ALERT

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Sept. 26-28 Alpha Hedge Institutional Investment Conference San Francisco Institutional Investor www.marhedge.com

Oct. 3-6 Fund Forum Middle East 2010 Bahrain ICBI www.icbi-events.com

To view the complete conference calendar, visit The Marketplace section of HFAlert.com

Ex-Chilton Manager Readies VehicleChilton Investment alumnus Michael Cahill is preparing to

launch a global long/short equity fund.Cahill, who established impressive track records at both

Chilton and, before that, Kingdon Capital, is expected to begintrading his Crispin Capital Partners fund sometime thismonth. It will be the second launch for his New York firm,Crispin Capital, which Cahill started last March. His firstvehicle, Crispin Capital Opportunity, is a closed-end high-yield bond fund that is set to liquidate after four years. Itgained 22.4% during its first six months, from July toJanuary, and is now expected to return capital to investorsahead of schedule.

With Crispin Capital Partners, Cahill is returning to hisroots as a long/short equity manager. As portfolio manager ofthe Chilton Global New Era Fund, Cahill helped produce a99.4% gain between April 2000 and November 2008 — a peri-od when the technology-focused Nasdaq index lost 65%. Beforejoining Chilton, he clocked three years at Kingdon, postingtriple-digit returns before the Internet bubble burst.

Cahill is expected to apply his fundamental-researchapproach as portfolio manager of the Crispin fund. For everydollar invested on the long side, the fund will bet at least 30cents shorting stocks. To keep a lid on risk, Cahill won’t lever-age his long investments.

Cahill will be assisted by two analysts: managing directors

David Herman and Gerry Horkan. Herman previously was afounding member of global equity and long/short credit man-ager Akasha Capital, and also counts Shumway Capital amonghis former employers. At Crispin, he is focusing on industrialand natural-resources companies. Horkan’s focus is on emerg-ing markets and investments in Asia. His resume includesstints as a senior vice president at Yahoo! and as a partner atconsultant Booz Allen Hamilton. v

Blackstone ... From Page 1

other pension executives are being advised by Aksia, a NewYork pension consultant.

The pension apparently settled on Blackstone because of itsexperience working with emerging managers via its $27 billionfund-of-funds business. The New York firm also runs hedgefund investments in customized managed accounts. BothProtege and SkyBridge are better known for their hedge fund-seeding businesses.

The emerging-manager program will target experiencedmanagers that have demonstrated strong potential but have yetto attract a wide following among investors. The planned seed-ing effort, on the other hand, will focus on new managers.Although still in its early planning stages, the seeding programis being designed to give the pension a stake in the manage-ment companies and a cut of their profits.

Pension officials have begun screening incubation firmsand funds of funds that could manage a portfolio of seedinvestments. The search initially will focus on 20 firms, thennarrow to a field of six. Eventually, New York Common Fundexpects to work with one or two multi-manager firms to estab-lish and manage the program.

A person familiar with the pension said there are two mainreasons it decided to invest in emerging managers. First, less-established managers tend to be nimbler than larger firms andgenerally produce their best returns in their initial years. Also,by getting in early, the pension would hope to maintain favor-able investment terms moving forward.

“Who is getting the market share but the Och Ziffs andMillenniums and SACs of the world?” said the person familiarwith the pension’s thinking. “If you don’t build a new genera-tion of managers, you wind up with an oligopoly that can dic-tate fees to you.”

As for the timing of the emerging-managers program, poli-tics may also be playing a role. Initially, market players didn’texpect an announcement before the November election. Butthe state’s comptroller, Thomas DiNapoli, who oversees NewYork Common Fund, faces a tough challenge from retiredhedge fund manager Harry Wilson, 38, whose resume includesstints at Blackstone, Goldman Sachs and Silver Point Capital.One market player said there may have been pressure to accel-erate the emerging-managers program to demonstrate thatDiNapoli can compete in the hedge fund arena.

New York Common Fund currently has about $3.5 billioninvested in hedge funds, but it plans to ratchet up its allocationto about $5.2 billion, or 4% of overall assets. v

May 12, 2010 14Hedge Fund ALERT

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LATEST LAUNCHES

Fund Portfolio managers, Management company Strategy Service providers Launch

Equity at Launch

(Mil.)

3 Rivers Activist Partners Domicile: U.S.

Lodovico DeVisconti LCV Capital, Pittsburgh 412-860-0171

Activist Prime broker: Lighthouse Prime Law firm: Reed Smith Auditor: KPMG Administrator: Concept Capital

April 22

Monarch Equipment Fund Domicile: U.S. ASee Page 13

Arjun Saluja Express Business Finance, Miami 800-700-0657

Credit Law firm: Sadis & Goldberg Auditor: Variman

April $10

To view all past Latest Launches entries, visit The Marketplace section of HFAlert.com

asset-management unit oversees $21billion in hedge funds and other typesof investments.

David Gaynes has quit his job as a salesexecutive in Deutsche Bank’s prime-brokerage unit to take a similar posi-tion at Barclays. Gaynes left his manag-ing director post within the past coupleof weeks and is serving out a gardeningleave before joining Barclays’ prime-brokerage group.

Robert Klein is about to start working asa salesman in the Los Angeles office ofPershing’s prime-brokerage business.Pershing hired him after two of its LosAngeles staffers jumped to a rival bro-kerage unit at Barclays. Klein was let gofrom J.P. Morgan’s prime-brokerageoperation in February, when the bankshut down the unit’s Los Angeles out-post.

Jared Weisfeld this month joined start-up fund manager Sursum Capital of

Greenwich, Conn., as an analyst. Hepreviously held a similar role at EricMindich’s Eton Park Capital. SAC Capitalalumnus Paul Orwicz establishedSursum earlier this year.

Tim Yam, formerly an analyst withWesley Capital, joined the New Yorkoffice of hedge fund operator GeorgeWeiss Associates in the past two weeks.He will work in a similar capacity atGeorge Weiss, which is based inHartford.

Robyn Browdy started work last week asa consumer-stock analyst at WaterfrontCapital, a fund-management unit ofMillennium Management. She is work-ing for portfolio manager EduardoAbush, who hired another analyst lastmonth. Browdy used to work at $1.7billion hedge fund firm Highline Capitalof New York.

AlphaMetrix moved into largerManhattan office space last week toaccommodate the growing number ofhedge fund managers it expects will useit to administer separately managedaccounts. The Chicago-based firm has

five people stationed in its new locationat 515 Madison Avenue. The primaryfocus at the new office will be businessdevelopment.

Jeff Schachter joined hedge fundmanager Helios Advisors last week,shortly after leaving CedarviewCapital, which he co-founded. NewYork based Helios has $550 millionunder management.

Hedge fund professionals are backingchess legend Anatoly Karpov’s cam-paign to become the next president ofthe World Chess Federation. In March,Karpov, a former world champion,named as his campaign director RonHenley, a hedge fund consultant andchess grand master who splits his timebetween Florida and New York. Thecampaign’s advisory board includesseveral big-name hedge fund pros,including Peter Thiel of Clarium Capital.Karpov’s team is holding a May 17fund-raiser in New York, where atten-dees will include Seneca Capitalfounder Douglas Hirsch, D.E. Shawquant Eric Meyer and Karpov’s formerchess rival, Garry Kasparov.

... From Page 1

THE GRAPEVINE

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May 12, 2010 16Hedge Fund ALERT