• Hedge funds can cut risk - Morgan Stanley study
• Goldman`s former star Mindich is to launch $3bn fund
• Merrill global co-head of rates and foreign exchange leaves to setsup global macro hedge fund
• The cauliflower theory of market volatility
• Market timing may work
• One in nine professionally managed portfolios in the U.S. has a social bent
• Will revealing state pension fund data tell the story?
• Guardian interviews Jim Rogers: the bull market in commodities
• Will $40 a barrel going to be considered cheap?
• Citigroup buys financial solutions firm Lava
• Governor of the Bank of England says fear grows that the housing market is a timebomb
• Prof. Harry M. Kat: Pension funds can benefit from new investment alternatives, but trustees are not up-to-date
• Herd-like scramble for alternatives is a hazardous business
• Academics warn: Don`t try to outwit the City traders in stock market spead betting
• Gartmore Named Institutional Manager of the Year
• FSA links fees to performance in funds shake-up (JP)
• New dynamics: me-toos grab stocks as hedge funds buy
• Man Group reviews line on directors` outside posts
• New rules for funds of funds in Ireland

• GAIM USA Fund of Funds: the largest gathering of hedge FOF and investors
• Financial Portfolio Management System – A Modular Front/Back Office System from Computer Design
• Hedge Fund Best Practices: Succeeding In the New Regulatory Environment
• Alternative Investment Roundup: three concurrent conferences on Hedge Funds, Private Equity & Real Estate
• IQPC’s 3rd pan-European forum on Hedge Funds for Nordic Pension Funds - 10% discount!
• 7th annual Hedge Funds World Asia 2004 Hong Kong - 10% Discount for subscribers!
• NEW! : 2nd Annual Global Absolute Return Congress (‘Global ARC’) Boston
• Contact

Hedge Funds: A Resource for Investors
Denis Masetti, Simone Borla
ISBN: 0-470-85095-7
Paperback
112 pages
February 2003

Order Hedge Funds: A Resource for Investors with us now and save 20%. Only £23.96/€36.00/ (US customers US$52.00 plus P&P. Quote promotion code CWD when prompted, or contact cs-books@wiley.co.uk for further details. Link for EU customers here. US customers, please follow this link. If you get this newsletter in the text version please use the link “View the HTML-Version” at the top of the newsletter or paste the following link into your browser to access the links to Wiley: http://www.opalesque.com/forward.php?to=op_3_2.php. Remember to quote CWD for your discount!

To the Recommended Reading Archive

IPE.com reports a study by Morgan Stanley suggests that hedge funds can reduce pension fund risk as part of a “holistic” approach to risk budgeting. “In the current low return environment, it is important that investors realize the maximum possible return given the risks taken,” say Bryan Boudreau and Joan Ka-Wai Tse in Morgan Stanley’s Global Pensions Quarterly. “This requires careful identification of investment objectives, return sources used to achieve these objectives, and the combination of exposures that can best optimize a given ‘risk’ budget.” Full article: Source

The FT reports Eric Mindich, the banker who made his name in the 1990s when he became the youngest ever partner at Goldman Sachs, is poised to make a dramatic comeback with one of the biggest hedge fund launches this year. The fund, to be called Eton Park, will have up to $3bn (£1.6bn) in assets and is scheduled to be launched in October. Investors will have to commit their money for three to five years…Full article: Source

Sources say Michael deSa, global co-head of rates and foreign exchange at Merrill Lynch, has left the company in order to set up a global macro hedge fund. He is to be partnered by Farhan Sharaff, formerly chief investment officer at Cigna and at Zurich-Scudder. The fund is expected to be launched in the fourth quarter with significant commitments already made. The fund will have a top-down approach, and will trade fixed income, currencies, equities, commodities, and emerging markets across the globe. Goldman Sachs is the lead prime broker. No online Source

The wild behaviour of markets and investors has attracted the interest of the finest academic minds. They are starting to tear up some of the standard "rules" that had been thought to apply to market movements. Best known are the assaults on efficient market theory, which states that prices reflect all known information and are set by rational investors. The behavioural finance school has shown that investors have psychological biases that affect their ability to make decisions. Prices can thus depart from fundamentals. The pattern of price movements is also unusual, as a soon-to-be-published book* by the mathematician Benoit Mandelbrot shows. Source

Eliot Spitzer has given market timing a bad name. But if the stock market remains stuck in a trading range, it may be the only way you can make money. So says Jim Paulsen, chief investment officer of Wells Capital Management. Paulsen says the buy-and-hold strategy that served investors so well during the 18-year bull market that started in 1982 won't work in the "range- bound" markets we have had since 1999 and are likely to have for years to come. The article explains market timing can also be as simple as rebalancing your portfolio once a year -- selling the winners and buying the losers -- to maintain a target allocation. When Paulsen started working for an investment firm in 1983, the term buy and hold was not in use because a buy-and-hold strategy would have gotten you nowhere in the 1970s. Source

One in nine professionally managed portfolios in the U.S. (totaling $2.14 trillion spread around mutual funds, pensions and brokerage accounts) has a social bent, according to the Social Investment Forum, a non-profit industry group. That group is likely to grow as socially responsible mutual funds (around 200 in number) multiply and increasingly become available through employer retirement programs. Source

Bizjournals.com reports Massachusetts Gov. Mitt Romney's declaration that he'll veto legislation preventing the state pension fund from being forced to disclose data about its private equity holdings is raising an interesting question. Why would people want the highly coveted internal rate of return (IRR) data anyway? The answer given by proponents of disclosure is that it is important for the public to know their money is being invested wisely. By releasing, say, three- and five-year returns of venture capital and buyout shops, the public can judge. Not so, says Kevin Callaghan, managing director at Berkshire Partners LLC in Boston, because in the private equity world there is no standard way for venture and buyout firms to attach a value to the companies in their portfolios. They all get to pick their own way of valuing an investment, so it's all apples and oranges Source

Jim Rogers’ - investment guru; co-founder of Quantum Fund with George Soros - reasoning is straightforward: raw materials are running out. "There has been no great oil discovery in the past 35 years," he argues. "The North Sea has peaked. Alaska is in decline. Mexico is in decline. All these great oilfields are in decline. To anybody who thinks I am lying about this, I would ask: where is the oil going to come from?...Mines deplete. Wells deplete. It's supply. In the 1970s, we had horrible economies around the world, but commodities skyrocketed despite those horrible economies because there was no supply. That is happening again." How high is high? The nature of all bull markets, he argues, is that prices go higher than anybody would have imagined…Full article: Source

AmeInfo.com reports: ….But all the signs are that the fundamentals are already back on top, and oil prices are going higher. Indeed, we may be approaching times when $40 a barrel is going to be considered cheap. The article asks to consider the oil market negatives: Militancy continues in Saudi Arabia, and the US has just advised its citizens to consider leaving neighboring Bahrain due to a credible terrorist threat. Even the reappearance of Saddam Hussein's face on the global media appeared to rattle oil markets, and his trial may not actually start until next year. Meanwhile, Asian economic growth and the US economic recovery continue to put severe pressure on oil supplies…full article: Source

Reuters reports global banking group Citigroup said on Friday its corporate and investment banking division is to buy trading solutions firm Lava Trading Inc. Lava Trading, based in New York City, is the largest provider of trading solutions to the financial services industry. Financial details of the deal were not disclosed. Citi maintains the firm will operate independently of its new parent. Source

In his interview with the Financial Times this week, Mervyn King showed he is becoming increasingly pre-occupied with the delicate subject of bomb disposal. With every month that house prices rise, the fear grows that the housing market is a timebomb under the economy and the case for attempting to defuse it becomes more pressing. Saying this week that rising house prices had been "very important" to the latest decisions to raise interest rates, and entertaining the idea of raising rates now to head off a crash, Mr King went significantly further than in the past towards accepting that the Bank needed to respond to the housing boom. Source

Prof. Harry M. Kat, professor of Risk Management and director of the Alternative Investment Research Centre, Cass Business School, City University, London, writes in the FT that after scandalous disasters the retirement industry urgently needs to restore confidence in its ability to deliver. Most pension funds stick stubbornly to the traditional asset classes of fixed income, equity and real estate. Over the past two decades, however, a new range of investment alternatives has emerged. The returns on many of these commodities, hedge funds, managed futures and private equity are only weakly correlated with traditional asset classes. Prof. Kat complains most of the trustees are simply not up-to-date with the latest academic research, new developments in the market place and the use of risk management tools. Full article: Source

Barry Riley from the FT writes today's global markets offer more scope than a national market fenced in by exchange controls. But the danger is that pension funds are doomed to create opportunities for hedge funds, rather than to profit from investing in them. Source

From the FT: …Prof Verrall has a warning for anyone thinking of getting involved in betting as an alternative investment: "There are a lot of people in the market doing a lot of work, and you will get fleeced by them if you don't match their effort and knowledge." Professor Mark Griffiths, who runs an international gaming research unit at Nottingham Trent University, echoes this caution. He says very few people have the expert knowledge necessary to be really successful. "People who spread bet on stock market movements are usually City traders who understand markets," … Full article: Source

Gartmore was named "Institutional Manager of the Year" at Alternative Investment News' second annual Hedge Fund Industry Awards. Gartmore currently manages more than $4.6 billion in global hedge fund assets for institutional and individual clients. The award cited the Gartmore U.K. investment team's success in building a hedge fund franchise by establishing a dedicated division running single-manager hedge funds and innovatively branding the funds as stand-alone products in order to better compete with independent providers. Source

According to the Scotsman.com, many fund managers charge excessively for poor returns year after year. All this could change, however. Recently, City watchdog the Financial Services Authority (FSA) agreed that fund management groups could link fees to performance, allowing them to reward good investment performance and to cut the charges if the results are disappointing. Some fund management groups are already looking at the possibility of taking advantage of the new rules. Source

According to the Telegraph, pubs group Enterprise Inns was one of the leading blue-chip risers Friday after a top hedge fund took a declarable stake in the company. The stock rose 10.5 to 575p after Enterprise Inns revealed that Landsdowne Partners owned 11.76m shares, or 3.4pc of the group. Source

According to the FT, Man Group is reviewing its policy on directors taking up non-executive positions on other companies' boards. The decision followed the debacle at Mayflower Corporation, which is now in administration. Chris Chambers, head of Man Investments, was a non-executive director on the board when the problems arose at the engineering group. More: Source

Mar/Hedge reports funds of funds will be disallowed from investing more than 20% of net assets in units of any one scheme, following amendment of Notice NU 25, "Funds of unregulated funds schemes," by the Irish Financial Services Regulatory Authority. Source

The Largest Gathering of Hedge Fund of Funds & their investors in the USA in 2004

This new GAIM event will enable debate on the critical strategic, operational and performance related challenges facing the industry in the heart of the fund of funds industry, NYC. With a speaker faculty widely hailed as a Who's Who of the Fund of Funds industry, discussions will draw on pioneering new research, expert opinion and advice from leading consultants, outperforming managers as well as the largest gathering of fund of funds in the USA in 2004.

For more information visit: www.gaimusaFoF.com or call +1-888-670-8200

In line with changing industry trends Computer Design’s modular Financial Portfolio Management System (FPM) has evolved over the course of time from a multi-currency-multi-instrument portfolio management system, to an institutional fund management system, managed futures system, hedge funds system. Here are some examples of the uses of the FPM system.

• Order Management: Creation of an electronic dealing pad to record the decision process and issue pre-trade breach warnings. Dealers are able to see open positions and P&L on-line. Back office can process the deals without re-keying.
• Managed Futures Accounts: One of the most time consuming tasks for the back office is to compute performance fees in accordance with client mandates. Normally fees accrue at periodic intervals and become payable depending on certain thresholds. In our solution accrual and payment records are accounted through FPM Cash Book/General Ledger and the fee notes printed automatically.
• Client Report Book: Each month client account managers send statements to clients with differing reporting requirements. FPM Client Report Book automates the procedure and provides straight integration with Microsoft Office.
• Financial Reports: Fund managers have complex financial reporting requirement for gross/net P&L, Income Forecast, Statement of Total Return, Balance Sheet. FPM General Ledger meets these requirements through a flexible combination of the accounting database and Excel.
• Performance Attribution: FPM Performance Attribution Module allows asset managers to maintain model portfolios and composite benchmarks and to determine asset class relative performance and contribution based on industry standard methods and integrated graphics output.
• Integrated System: Computer Design creates integrated systems with straight through processing between all departments with a flexible general ledger back-bone, data feed interface for prices and corporate actions, financial reporting and an interface to the custodian for settlement instructions. All of our clients have evaluated a number of systems but only FPM could provide the required functionality for the price.

As the outside world continues to probe the day-to-day operations of hedge funds and their managers the need for them to develop an internal infrastructure significantly increases.

This one day seminar addresses not only the latest SEC proposals but will also assist a hedge fund in choosing and developing the tools they need to create an infrastructure designed to meet the day-to-day operational, regulatory and ethical challenges they face. These issues are fundamental to protecting the bottom line and long term strategic growth of any hedge fund organization.

Whether a hedge fund manager is starting up its first fund, is registered or unregistered, or whether it has been around since the creation of hedge funds, the problems and issues are often the same and require urgent attention. Tackling these issues head on Institutional Investor presents its Hedge Fund Best Practices Seminar. Click on link for further information:

The Alternative Investment Roundup is three concurrent conferences at the same location covering the most important alternative asset classes-Private Equity, Hedge Funds, & Institutional Real Estate. The programs share networking events, offering you unmatched opportunities to meet a wide array of alternative investment professionals and investors. Over 750 decision makers attended last year's event.

10% discount for Alternative Market Briefing Readers for the Alternative Investment Roundup.For more information, please visit www.srinstitute.com/air or contact Chris Petersen at CPetersen@srinstitute.com

10% DISCOUNT for Alternative Market Briefing Readers (quote AMB) PLUS: BOOK BY June 25 and receive a FREE copy of the Hedge Funds Strategies Book.

Visit: http://www.iqpc.co.uk/GB-2272/AMB for more information - Significant discounts also apply for institutional investors

Finance IQ’s annual forum is widely recognised as the ONLY event dedicated to pension fund managers investing in hedge funds. This year's programme will expand upon core issues from last year, and will tackle the most pertinent challenges which have arisen over the past 12 months. Many Nordic hedge funds doubled their assets under management last year. Hear from the following pension funds & hedge fund experts:

Folksam, Postens Pensionsstiftelse, Finansinspektionen, Skandia Insurance Company, Forsakringsforeningen for det Statliga Omradet (FSO), AP2, Lansforsakringer AB, Hermes Pensions Management, London Business School, Harcourt Investment Consulting AB, Asterias, Swiss Capital Group, EIM, ADI Gestion, AP7, FGS Capital

To guarantee your place visit: http://www.iqpc.co.uk/GB-2272/AMB or email: sonia.pun@iqpc.co.uk or call: +44 207 368 9300 quoting AMB to receive your 10% discount.

With over 90 expert speakers form over 15 countries; the 7th annual Hedge Funds World Asia is the regions leading alternative investment event and Hong Kong's only hedge funds event with a proven track record. For more information please contact Rani at Tel: +65 63222 721 or mail to rani.kuppusamy@terrapinn.com

Pension/Endowment speakers include:

• from North America: ABP Investments • Alberta Revenue • CDP Capital • City of Philadelphia Public Employees • Emory University Endowment • George Washington University Endowment • MIT Endowment & Retirement Plan • New Hampshire Retirement System • Texas Teachers Retirement System • The Atlantic Philanthropies • University of California Endowment • University of Texas Endowment • Verizon Investment Management • Virginia Retirement System • World Bank Pension Plan
• from Europe: AP7 Pension Fund • Danish Lawyers & Economist Pension Plan • KLM Airlines Pension Plan • Pension Fennia • Skandia Liv
• from Asia and Australasia: Commonwealth/Public Superannuation Scheme • Mitsubishi Corporation Pension Fund • New Zealand Superannuation Fund • Retail Employees Superannuation Trust • Victorian Funds Management Corporation

For registration go to www.global-arc.net or contact David Stewart at david@global-arc.net

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