Tag Archives: hedge fund managers

Partner Fund Management

Partner Fund Management was launched by Christopher James in 2004. It is a hedge fund management firm that runs a number of funds focused on healthcare, technology and the broader stock market. It isn’t as big as the Paulson Hedge Fund, but it is definitely as noteworthy. It is located out west in the city of San Francisco and it also employs the talents of Christopher Aristides and Brian Grossman.

Partner Fund History
Prior to starting Partner Fund, James ran Andor Capital Management. Then he launched Partner Fund with the backing of Goldman Sachs. The firm runs close to $2B in its various equity strategies.

Partner Hedge Funds
Partner Fund Management runs the following funds: Partner Fund; Partner Healthcare Fund; Partner Principal Fund; Partner Technology Fund and PFM Meritage. It tends to run a very concentrated portfolio.

Partner Fund Holdings
The firm has a heaving weighting towards Healthcare and Technology as these industries are where it has a great expertise. But it also has a fair allocation to other sectors of the stock market through its more generalized funds. Some of its top holdings include the MSCI Emerging Markets ETF, Google, Wyndham and Salesforce.com.

High Stakes Wagers
When James isn’t making large wagers in the financial markets he can be found making massive wagers in fantasy football. He is a member of a $1M fantasy football league with the likes of Paul Tudor Jones, Stanley Druckenmiller, Michael Novogratz and other hedge fund heavy weights. The dues to enter the league are $100K and membership is capped at 10 members.

But the most interesting thing about this league is that the winner keeps his winnings. Instead everyone plays only for bragging rights. The winnings go to a charity started by Paul Tudor Jones called the Robin Hood Foundation. It supports a number of charitable foundations in NYC. So the real winners are the people who these charitable organizations help.

Trian Fund Management

Trian Fund Management is run by Nelson Peltz, who is known for having earned a high hedge fund manager salary. Trian’s primary focus is value investing in publicly traded stocks.

In 2011, Trian acquired a stake in Family Dollar Stores and announced that it wanted to take it private. But this offer was rejected by management.

Trian Gets Its Start
The seeds of Trian were planted a long time ago, back in 1984. Peltz controlled Triangle Industries and used it to take over National Can. Triangle was much smaller than National, but it received a lot of help (and financing) from junk bond king Michael Milken.

Later another of Peltz’s vehicles Triarc acquired the fast food chain, Wendy’s. It was renamed Wendy’s Arby’s Group and floated on the NYSE.

So based on the names of his companies, one might surmise that Peltz is fascinated with “tri” or perhaps the number three.

Peltz doesn’t just buy and sell stocks, but he is known to get involved with the underlying businesses that he purchases. He isn’t afraid to get his hands dirty and he works hard to make sure that they perform to their full potential.

The Best Advice Peltz Received
Peltz says that the best advice he ever received was from his father, who told him to work on increasing sales, while keeping expenses under control. This advice of course makes a lot of sense, but the real difficulty is not in understanding it, but in implementing it. Everyone, well almost every business, is trying to do this but not every business is succeeding at this task. But when they do succeed, shareholders and investors do very well.

After buying Snapple in 1997, Peltz had it focus on delis and pizza joints and this singular focus reignited growth in sales. As sales rose, Peltz made sure that expenses were tightly contained. This caused margins to grow and the value of his investment in Snapple to increase.

His shrewd investing and business acumen has allowed Peltz to generate a net worth that is in excess of $5B, which is quite a tidy sum of money. Peltz has homes in New York, Paris and Palm Beach. His Palm Beach house is reputed to be one of the most expensive houses in the United States. All this is not bad for Peltz, who like Bill Gates, was a college drop out. He started college at Wharton, but never finished. Perhaps getting a degree wasn’t as important as getting started on building his fortune.

Hedge Fund Research

There are more than 10,000 hedge funds, so what is the best way to perform hedge fund research to find the top hedge fund managers? The truth is: there is no best way to perform hedge fund research. You can probably start with one of the many hedge fund databases, but from there you will have to do a lot of leg work and due diligence. Hedge funds in general are very secretive and getting data and intelligence on them is difficult. But they are much more willing to give you information if you have something that they want.

Informational Leverage
Unless they have so much assets under management that they are turning away investors, hedge funds want your money. They want your money to increase the size of their assets under management so that they can have a bigger pay day in the future, when they generate big returns on their AUM.

Until they collect your investment, this is a significant source and probably only source of leverage that you have over them to get the information you need to make an informed investment decision. Once you sign on the dotted line, they have much less incentive to cooperate with your requests for information.

If a fund has a long lock up period or side car provisions, they can be even less forthcoming than a fund with no lock up period, so be especially careful with these types of funds. The longer you lock in the less concern the fund has about you withdrawing your money, so you have less leverage.

Integrity is the Word
When performing research on a fund the most important thing to understand is the people that run it. The most important quality above all others is integrity. They will be managing a significant portion of your wealth so they had better be the most trustworthy people you can find.

Do Your Own Homework
You have to do your own due diligence on this. You can’t rely on the impressions and presence of others whom you feel are good investors who have done their homework. At times, people invest in funds because other well known investors have invested in them. They assume that the presence of these well known investors means that all of the due diligence has been done and that the fund is legitimate. However, this is not always the case. Just look at the example of Madoff.

Madoff was a fund with tens of billions of dollars from many prominent investors. It was a Ponzi scheme that was a bag of hot air, but somehow many highly regarded investors were suckered into it. Everyone assumed that everyone else had done the required research and they did not bother to do their own research and just look at what happened.

So do not make the same mistake. Make sure that you meet all of the principals of the firm and make sure that your gut instinct says that they are trustworthy. Would you trust them with your wallet? If not, pass on investing in them.

Hedge Funds NYC

NYC and Manhattan in particular are often seen as the center of the financial universe and there are many hedge funds in NYC. These are some of the biggest and the best hedge funds and hedge fund managers that NYC has to offer.

Cerebus Capital
Stephen Feinberg runs Cerebus Capital from NYC. Cerebus is a $19B fund that specializes in distressed investments such as companies on the verge of bankruptcy. He worked at Drexel in its heyday when Milken was a master of the universe and making hundreds of millions when centi-millions actually were a lot of money.

D.E. Shaw
David Shaw runs D.E. Shaw & Co. It too is headquartered in Manhattan. Shaw was one of the first big quantitative investors who relied on computer models to trade financial assets and he was one of the most successful, right up there with James Simmons at Renaissance. His firm took a massive beating in 1998 during the whole crisis caused by the Russian default and Long Term Capital blowup. But his firm has bounced back and is still in business. He used to be a computer science professor, but as a hedge fund manager is worth more than $1B. Not bad for a rocket scientist.

Fortress Investment Group
Michael Novogratz runs FIG, which is a NYC based firm. It has more than $4B in assets under management and Novogratz is personally worth more than $2B. He got his start with Goldman and runs the firm with the assistance of Briger and Edens. He used to fly helicopters in the army and so he probably has nerves of steel, which is helpful in this volatile investment climate.

Goldman Sachs Asset Management
This is an internal division of G.S. It is also located in Manhattan and is responsible for more than $32 billion dollars. It has had a number of up and down years, but always seems to find a way to come out on top.

Millennium Management
Millennium is controlled by Israel Englander, who has a very interesting name that incorporates two countries in it: Israel and England. Englander donates tidy sums of money to Jewish causes, so it appears that he skews towards Israel. He is an outstanding trader, who unfortunately got caught up in the mutual fund market timing scandal. He got off fairly easy, paying $30M out of his own pocket and of course no jail time.

Third Point
Daniel Loeb runs NYC based firm, Third Point. He is an excellent stock picker who is known for writing caustic letters to under performing management teams. He is known for regularly going activist to get poorly performing companies to perform better after he makes large investments at fire sale prices.

What Are Hedge Funds?

Hedge funds are private investment partnerships that specialize in strategies that aim to make money in any market environment. The aim of a hedge fund is to generate returns no matter what the market does. If the market goes up, a good hedge fund would seek to match the market’s rate of return. If the market goes down, likewise the fund would aim to generate a positive return in excess of the risk free rate.

How Do Hedge Funds Make Money?
Hedge funds make money by buying under valued assets and selling over valued assets. When these assets return to their fair value the fund will generate a positive return. If the hedge fund in market neutral, this means that the assets that the fund has bought are matched by the assets that the fund has sold. If the hedge fund manager choose these assets wisely, this means that the combined portfolio should be unaffected by market movements and that it would generate a return greater than a risk free asset with no risk.

How Do Hedge Fund Managers Earn Their Money?
Hedge fund managers are typically paid 2% of assets and 20% of profits. This means that apart from the 2% asset based fee, they only make money if their investors make money. Most investors are willing to pay these fees because they expect the hedge fund manager to generate excess returns that will more than make up for their fees.

How Do You Invest In A Hedge Fund?
First you have to have a lot of money. The financial regulators require that hedge fund investors be accredited. The rules change frequently, but this typically means having close to a million dollars in liquid assets or a very high income. The assumption is that if you have a lot of money, you will be smart enough to choose a good hedge fund manager. Hedge funds are much more loosely regulated than mutual funds, which are open to all investors. This loose regulation is why regulators require hedge fund investors to be accredited.

How Are Hedge Funds Structured?
Most hedge funds are structured as limited liability partnerships. The investors are limited partners, while the fund manager is the general partner. To further reduce their liability the general partner is often a limited liability corporation that is owned by the hedge fund manager. Often hedge funds are setup off shore to take advantage of even lower regulation and higher levels of financial privacy.