HEDGE FUNDS
BY: MAHA KHAN PHILLIPS • PROFILES BY: STUART NEWMAN
I
t is an interesting time to join the Hedge Fund Research, compared with
hedge fund industry, because it is 563 in the whole of 2007.
“A hedge fund,
going through rapid development At a basic level, hedge funds seek to
and change. Unfortunately, most of the provide absolute return performance to
generally speaking,
change is painful in the short term. their clients by hedging their bets. Th ey
Life after the credit crunch will never use a variety of methods like short
be quite the same for the £2 trillion selling, where certain stocks are shorted is probably not the
industry, which is comprised of 10,000 while the fund goes long on others.
funds, and which is expected to see However, a long/short strategy is just
massive falls in numbers. Panicked one of many used by hedge funds, some
best place for your
industry participants have estimated of which do not short or even
that anywhere from 30%-70% of necessarily hedge. Hedge funds also use
fi rst job in the
hedge funds will fail because they are leverage, derivative contracts, and
running out of funding, have less structured and securitised instruments.
access to leverage, and will have On average, they charge a 1%-2%
investment
diffi culty gaining credit. Cooler heads management fee, and 20% performance
suggest these numbers are far too high, fee. It is precisely this fee structure that
but agree that many managers will fall is causing problems now, when hedge
business.”
by the wayside. Approximately 350 funds are fi nding it diffi cult to provide
Igor Ojereliev, CFA,
hedge funds closed in the fi rst half of alpha. Critics are also pointing out that
Próxima Alfa Investments
2008, according to Chicago-based hedge funds which are choosing to stay
MARK POTTER
Title: Investment Principal
Current employer:
Audley Capital Advisors
Are there certain skills you would consider useful for your job?
Previous employers:
It’s vital to understand what is saleable. It’s also important to
Citigroup; Dawnay Day
develop trusting relationships with management teams. An ability
University:
to quickly see the numbers behind any investment and
Trinity College, Cambridge University
understanding the macro economic backdrop is particularly
Degrees:
Bachelors in Engineering and
useful. Lastly, staying calm and thinking rationally when everyone
Management Studies
else has lost their nerve is a real asset.
Professional qualifi cations:
CFA Level III candidate; IMC How do you think the role you’re in now will change over time?
As assets under management grow and we launch new funds, my
What attracted you to this career path?
role will involve working with a wider range of investments with
I was excited by the prospect of starting a hedge fund that would
larger market capitalisations. It will inevitably require supervising
take sizeable stakes in companies with a view of effecting change
larger investment teams.
via M&A, fi nancial restructuring or changes in corporate
governance.
Do you have advice for someone intending to pursue the same
What are the major challenges you face in your position?
career path?
Convincing CEO’s and boards of listed companies to work in the
Don’t be afraid to start or join an early stage hedge fund, it may
shareholders’ best interests is extremely challenging. Also
be higher risk but the experience is among the most rewarding.
diffi cult is determining when to rescue a company and when to
View your career as a marathon rather than a sprint and do not
cut losses.
be put off by unpredictability and volatility in hedge funds.
20
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