My feedback from GAIM: the year of the Survivers!

GAIM Monaco is one of the annual rendez-vous of the hedge fund industry. The conference manager, Jenny Adams, knows in and out the sector and has worked on these events for more than 10 years. She always manages to attract key investors and interesting high profile speakers.

Already back last year, one could feel the significant decrease of participants (estimated at 1200 at the peak of summer 2006, 800 in June 2008 and 400 in June 2009)./ However, I have seen more senior people motivated to discuss, exchange ideas and meet the “survivors”. Indeed, the spirit is good, not depressed but people are rather looking to convince peers and investors and demonstrate their willness to move ahead.


Investors / Les investisseurs?
- Switzerland seems highly affected by investments in Madoff/ la Suisse est sinistrée avec les investisseurs meurtris par Madoff.
- Funds of funds are less there / Les fonds de fonds moins présents
- More Pension funds/ Plus de présence de fonds de pension
- Strong presence of the Bank of China Investments that has announced a programm of investments of …4 to 6 bn dollars by the end of 2009 in HF and 10 bn by 2011. They announced that they would choose Managed Accounts and strategic partners to create dedicated products. They only have 4 people dedicated to HF investments. La présence trés remarquée de Bank of China Investments qui annonce un plan d’investissements de …4 à 6 milliards de dollars en hedge funds d’ici fin 2009…et 10 à 12 milliards en 2011; preference pour Managed Accounts et strategic partners. 4 personnes uniquement pour les investissements.

Best speeches / Les speech marquants:

1- The one from Pierre Lagrange, founder of GLG Partners, who is celebrating his 20 years in the UK. He promotes the model of going public which is more demanding and can become an obcession and is forcing to communicate well, which he thinks HF should do more. He defines his business as being “an asset gatherer” to be able to attract the best talented managers.
Celui de Pierre Lagrange, trés modéré qui fête ses 20 ans à Londres cette année. Il revendique le modèle du listing public, exigents, obsédant mais qui force à communiquer correctement, ce que les hedge funds dit il, devraient faire mieux. Il définit son business comme un “asset gatherer” pour pouvoir avoir les moyens d’investir dans les meilleurs traders “get the right talents on board”.
2- Dr Phillipa Malmgren. Used to work at Washington and participated to the elaboration of the Sarbenes Huxley regulation. She sends a big wake up call to the hedge fund sector mainly in offshore. She predicts that the US governments and all Western Governments need to take money where it is and will link all efforts to extract money from fiscal paradises. We are just at the beginning of a big regulation process which she thinks HF managers totally ignore for the moment. The HF the more vulnerable are the one in lending business.
She also warned the hedge fund managers on the possibility for a sharp rise in interest which will hurt the youngest managers that have enjoyed 10 years of low interest rate environment.
3- Investor’s panels: PGGM, Bank of China, MN Services and Abu Dhabi Commercial banks: all claiming for more transparency, fees aligned to the size of the managers, to the alpha provided or to strategies. They insisted on allocating the right amount of risk to target the right returns and are looking for the best risk adjusted returns.
4-Volatility arbitrage: "No investors can allow zero insurance on its portfolio" says Capstone fund manager. "I had to refuse investors who wanted to invest in my long program when the VIX was at 60% and today they are not interested to buy when it is traded at 30%...". Volatility arbitrage is a strategy where selecting managers is not easy to understand how they trade and what are the underlying risks. However it is certainly a strategy to look at that has capacity (estimated current AUM at $20bn) and a good potential in an environment where we could expect more volatility.


In one year, looking at the sponsors, one can see the absence of the major banking groups. Where are the UBS of this world that used to dominate the market? Now you have HF managers such as IKOS exhibiting and that's new.
The landscape has changed, the actors are changing; the powerful Prime Brokers have left the field, except Newedge who is the big winner these days.

I was disappointed by the lack of fresh and innovative ideas from FoF in asset allocation. Nothing major here.
Some are moving away from the traditional split of strategies and are introducing new ways to classify managers by buckets of underlying risks, volatility, sensibility to beta, leverage, across strategies.
What is also missing is more guidance on why allocating in 2009 in HF? What type of allocation?

One thing true is Bill MacIntosch’s conclusion in his super article today in the Hedge Fund Journal: the best are surviving and will go stronger, wiser and less arrogant.