1 2 3 4 5 6 7

InsIde

tananbaum lIkes gazprom debt GoldenTree’s founder says Russia’s biggest gas producer presents an opportunity: Market Calls, page 5

new launches Steven Cohen is said to back Gabriel Plotkin’s fund with $200 million. 36 South is starting a new fund targeting Australian institutions seek-ing downside protection: page 2

market calls: revIsIted How BlueMountain Capital’s bet on Lexmark Inc. shares has paid off so far: page 4

actIvIsm Cevian Capital says VW’s takeover of Scania AB would help Volvo reach targets set by the fund: page 3

over the hedge Man Group triples Emmanuel Roman’s pay to $3.4 million: page 5

research round-up CTAs and global macro funds may be poised to benefit from positive surprises in the euro area, according to Lyxor Asset Management: page 5

calendar of events: europe page 6

spotlIght Twin Capital Management CEO David Simon on why it’s a good time to buy U.S. airlines: page 7

By FABIO BEnEDETTI-VALEnTInIdominique strauss-kahn, the former head of the International Monetary Fund who

last year became chairman of a Luxembourg-based bank, is planning to raise $2 billion for a hedge fund he’s setting up.

The move is part of efforts Strauss-Kahn, or DSK as he’s known in France, has been making to rebuild his post-IMF life after he was charged in 2011 with criminal sex, attempted rape, sexual abuse, unlawful imprisonment and forc-ible touching of a chambermaid at the Sofitel hotel in Manhattan. Strauss-Kahn, 64, denied the charges, which were later dropped, and he settled the maid’s lawsuit in 2012.

Strauss-Kahn joined lsk & partners last year as chairman to help develop the Luxembourg-based company’s franchises. The hedge fund he’s setting up, called DSK Global Investment, will be directly managed by him and will benefit from “academic re-search and practical knowledge, both stemming from Dominique Strauss-Kahn’s experience as a public figure,” mohamad zeidan, LSK & Partners’ chief operating officer, said in a phone interview from Shanghai.

“It’s transparent, no leverage,” he said.LSK & Partners aims to raise funds “on a global level” for the new

fund and a trip is planned to the Gulf region in about a month, followed by a visit to Rus-sia, Zeidan said. Strauss-Kahn’s fund aims to attract about 20 institutional and private in-vestors including “anything from family offices to high-net worth individuals,” Zeidan said.

DSK Global Investment’s research will be headed by Vanessa Strauss-Kahn, Domi-nique’s daughter and a Paris-based professor of economics at ESCP Europe. LSK & Partners hired her as an adviser while she continues with her teaching job, Zeidan said.

Strauss-Kahn, a former French finance minister and a potential presidential hopeful for the Socialist Party in the 2012 French elections, has been taking on consultant roles.

Strauss-Kahn Plans to Raise $2 Bln Macro Fund

Dominique Strauss-Kahn

new mandates: early-state hedge funds

0 2 4 6 8 10 12 14 16 18

Apr-13May-13Jun-13Jul-13

Aug-13Sep-13Oct-13Nov-13Dec-13Jan-14Feb-14Mar-14

Source: Bloomberg Mandates

Institutional searches for early-stage hedge funds have increased since September, according to Bloomberg data. Since that month, there have been an average of almost 12 such mandates, defined as searches with no requirements for track records or assets under management, compared to an average of four for April through August. Since October there have been four consecutive months of 10 or more searches for early-stage funds, a streak that is expected to continue in March, which already has nine.

— Nathaniel E. Baker

Institutional mandates for hedge funds are now available on the Bloomberg terminal via MND<GO>. Access is provided to Bloomberg Anywhere clients at buyside firms. Contact your sales representative

for questions about accessing the function. For more information about Bloomberg Mandates, e-mail mandates@bloomberg.net.

BRIEFHedge Funds Europe NEws, aNalysis aNd CommENtary

03.21.14www.bloombergbriefs.com

1 2 3 4 5 6 7

launcheS

Sac’s cohen Said to Back Plotkin Fund With $200 Milliongabriel plotkin, one of sac capital advisors lp’s top money managers, plans to

leave by the end of the year to start his own hedge-fund firm with the backing of his boss, billionaire steven a. cohen.

Plotkin, 35, who oversaw more than $1 billion including leverage at the Stamford, Connecticut-based firm, may get more than $200 million from Cohen, according to a person with knowledge of the plans.

Plotkin is the latest SAC money manager to pursue his own venture after the company agreed in november to plead guilty to securities fraud and switch to a firm that manages Cohen’s wealth. SAC, which is changing its name to Point72 Asset Management, said in February it shrunk its headcount to 850 people from 1,000.

Plotkin didn’t respond to e-mails and telephone messages yesterday seeking comment on his plans.

— Saijel Kishan

36 South to Start new Volatility Fund Targeting australia36 south capital advisors llp is starting a new hedge fund targeting Australian insti-

tutions seeking protection from market downturns and additional returns.36 South, based in London, will start the Kohinoor Pacific Fund on April 1, it said in an

e-mailed statement late yesterday. An unidentified Australian institution will provide initial capital to the fund, it added.

36 South is starting the fund when it’s cheap to buy protection against increases in volatility, which can also give investors a source of return separate from stocks, it said.

“It is entirely conceivable that both bond prices and equity prices will move down together in the next serious downturn,” 36 South Chief Investment Officer Jerry haworth said in the statement. “Portfolio losses in this scenario will be exacerbated and the need for diversifiers will be greater than before.”

36 South’s flagship Kohinoor series of funds profit from volatility by investing mainly in “long-dated” and “bullish and bearish options.” The offering has returned an annualized 10 percent since inception in 2002 and 73 percent in 2008, according to the statement.

It also oversees funds that benefit from rare events that have a heavy impact on mar-kets such as the 2008 global financial crisis.

As much as 30 percent of the capital in the new fund will be invested in a pool designed to protect against price swings in the Australian financial markets, according to the statement. Sixty-five percent will be allocated to the Kohinoor Core Fund, the company’s higher-risk main global volatility fund that started in March 2011 and invests as much as 95 percent of its capital in options, it added.

The Kohinoor Core Fund has lost a cumulative 11 percent since inception, according to the company’s website.

— Bei Hu

“They’ve squeezed all of the toothpaste out of the tube.”

— Andrew Rabinowitz, Marathon Asset Management, on why

he “hates high yield” (see story, page 4)

Quote of the week

bloomberg brief hedge funds europe

bloomberg brief executive editor

Ted Merz tmerz@bloomberg.net +1-212-617-2309

bloomberg news managing editor

Edward Evanseevans3@bloomberg.net+44-20-3525-319

hedge funds editor

Darshini Shah dshah165@bloomberg.net+44-20-7392-0790

hedge funds contributing editor

Nathaniel E. Bakernbaker14@bloomberg.net+1-212-617-2741

reporter Kelly Bitkbit@bloomberg.net+1-212-617-1097

contributing reporters

Katherine Burton kburton@bloomberg.net+1-212-617-2335

Saijel Kishanskishan@bloomberg.net+1-212-617-6662

contributingdata editors

Akiko Itano aitano1@bloomberg.net+1-609-279-5064

Anibal Arrascueaarrascue@bloomberg.net+1-609-279-5084

newsletter business manager

Nick Ferris nferris2@bloomberg.net +1-212-617-6975

advertising Adrienne Bills+1-212-769-0480

reprints & permissions

Lori Husted lori.husted@theygsgroup.com +1-717-505-9701

To subscribe via the Bloomberg Terminal type BRIEF <GO> or on the web at www.bloombergbriefs.com.© 2014 Bloomberg LP. All rights reserved.This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints and permissions group listed above for more information.

In July, he was appointed to the supervisory board of the Russia Regional Development Bank, owned by oil producer OAO Rosneft He is also advising the Serbian and South Sudan governments.

LSK & Partners – renamed last year using Strauss-Kahn’s and Chief Executive Officer thierry leyne’s initials – has a staff of about 100 people and three trading platforms in Luxembourg, Monaco and Tel Aviv, Zeidan said.

LSK & Partners has submitted a registration application for the DSK Global Investment fund with the Luxembourg regulator CSSF, he said.

strauss-kahn...

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 2

1 2 3 4 5 6 7

By VEROnICA EK AnD nIKLAS MAGnUSSOnVolkswagen AG’s planned $9.3 billion

takeover of truckmaker Scania AB may help rival Volvo AB reach targets set by activist shareholder cevian capital ab.

Volvo’s second-largest shareholder has been lobbying the Swedish truckmaker to streamline operations and boost margins. A combination between Scania and VW-con-trolled MAn SE could be a boon for Volvo, and help the company gain market share, Cevian Chief Executive Officer christer gardell said in an interview.

“In the short term, I think the integra-tion of the two companies would create some confusion among the customers,” Gardell said. A merger between Scania and less-profitable Munich-based MAn “would benefit Volvo,” in which Cevian has held shares since 2006.

VW offered 6.7 billion euros on Feb. 21 for the shares in Scania it doesn’t already own

to create a global heavy-trucks unit that can compete with Daimler AG and Volvo.

With about 9.5 billion euros in assets un-der management, Cevian held 11 percent of the voting rights in Volvo as of Dec. 30 last year, according to information on the truckmaker’s website.

Cevian has started shifting its portfolio by investing in a listed company in Europe. To free up funds for additional moves, the investor plans to exit one of its current holdings this year, Gardell said, declining to identify the companies.

Gardell, who co-founded Cevian in 2002, expects Volvo’s trucks and construction equipment units to generate adjusted Ebitda at a pace of at least 10 percent of sales by the end of this year. “It would be a disappointment otherwise,” he said. 2014 will be “a year to deliver.”

The units reported Ebita margins of 4.3 percent and 4.7 percent in 2013, respec-

tively, he said. Volvo’s operating margin excluding restructuring charges was 2.9 percent last year, down from 6.5 percent in 2012, according to the company’s Feb. 6 fourth-quarter earnings statement. Gardell said that the complexity of the company has crimped margins.

The combination of MAn and Scania would see them overtake Volvo as the world’s second-largest truckmaker.Even with a new larger competitor, Volvo’s pros-pects are positive after the Gothenburg-based company renewed its product fleet last year, Gardell said.

“I have confidence that Volvo, under the leadership of Olof Persson and Carl-Henric Svanberg, will be able to deliver,” he said.

Since Svanberg became chairman in April 2012, Volvo shares have advanced 6.4 per-cent through March 18. They have gained 25 percent since Persson became CEO in September 2011.

acTiViSM

cevian Says VW’s Scania Merger Will help Volvo Profitability

MOST HEAD HUNTERS HAVE ONE OR TWOpEOplE cOVERiNg ASSET MANAgEMENT.

WE HAVE TWENTY.

Asset management is complex. Dealing with a myriad of asset classes on a global basis takes technical

knowledge and knowledge means people. lots of them, doing different things. We have people

specialising in each of these areas and solid relationships with the top talent around, which means

we offer you insight and speed to your successful hire. So, the next time you want to hire a

senior person and you do not want your time wasted, have a think: call Armstrong.

42 New Broad Street, london

www.armstrongexecutivesearch.com E X E c U T i V E S E A R c H

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 3

1 2 3 4 5 6 7

marathon ‘hates high yield,’ coo rabinowitz says

marathon asset management lp is betting prices will fall in the high-yield, high-risk bond market because interest rates and defaults probably will rise.

“We hate high-yield – we’re actually short high-yield,” andrew rabinowitz, Marathon’s chief operating officer, said this week on a panel at the Absolute Return Symposium 2014 in new york. “It’s trading at dangerous levels.”

Rabinowitz joins doubleline capital lp’s Jeffrey gundlach and oaktree

capital manage-ment lp’s howard marks in voicing concern that the junk-debt market is showing signs of froth. Speculative-grade bonds have returned 148 percent since the end of 2008 as five years of easy-money policies by central banks led investors to pour unprecedented

amounts of money into the market.With borrowing costs for the least-credit-

worthy companies globally approaching the record low of 5.94 percent, junk bonds no longer provide enough of a buffer from rising Treasury yields as the Fed trims its stimulus, said Gundlach, whose Double-Line Capital oversees $49 billion.

“They’ve squeezed all the toothpaste out of the tube,” the bond manager said this month in a telephone interview from Los Angeles. “There is interest-rate risk that’s just being masked by fund flows holding up the prices of junk bonds.”

The amount of high-yield securities worldwide tracked by a Bank of America Merrill Lynch index has ballooned to $1.97 trillion from less than $1 trillion in March 2009.

steven tananbaum, chief investment officer at goldentree asset management lp, also said at the event in new york that it will be difficult to make much money on speculative-grade corporate debt.

“It’s going to be very hard to get more than 5 percent returns in high-yield or

loans for the rest of the year,” said Tanan-baum, who founded the $18 billion new york-based investment firm.

Still, loans offer “the best value rela-tive to bonds in 15 years” because their interest payments are floating-rate, which offers protection against rising interest rates, he said.

david sherr, the founder of one wil-liam street capital management lp, said at the conference that while relative yields on junk bonds are “aggressive,” it may be difficult to make money short-ing the debt because it may take time for yields to climb. Any spread widening would then be offset by the lower risk premiums associated with a closer matu-rity date, said Sherr, whose One William Street manages more than $2.5 billion.

— Jody Shenn

tananbaum sees gazprom opportunity amid turmoil

steven tananbaum, chief investment officer of goldentree asset manage-ment lp, said OAO Gazprom presents an opportunity amid turmoil.

Russia will do “its best” to honor the debt of Moscow-based Gazprom, Tanan-baum said at the Absolute Return Sym-posium. He also said Russia’s sovereign debt is at an “interesting level,” being 50 to 100 basis points cheaper than fair value models suggest.

Tananbaum likened his purchases of Russia’s biggest gas producer to invest-ments he made in the debt of Spanish regional authorities including Madrid last year. Municipal debt traded at more de-pressed levels than the country’s federal securities and provided bigger returns

MaRKeT callS ITEMS MAy BE SUBMITTED TO HEDGEBRIEF@BLOOMBERG.nET FOR COnSIDERATIOn

bluemountain capital management llc took a 5.6 percent stake in lexmark International Inc. last April, at the time its biggest equity wager. andrew feld-stein’s fund bought 3.56 million shares, worth about $105 million, it said in an April 26 regulatory filing (Bloomberg Brief, April 30, 2013).

BlueMountain’s bet paid off in the near-term, as Lexmark’s stock rallied by 40 percent through Aug. 13 to reach $41.11 per share, which would turn out to be its highwater-mark for 2013. It surpassed that level in February and this week was trading as high as $44.50 per share, its highest point since 2010.

20

25

30

35

40

45

3/1/13 5/1/13 7/1/13 9/1/13 11/1/13 1/1/14 3/1/14

LXK

Pric

e

Lexmark International Inc. (LXK US Equity)

Source: Bloomberg

bluemountain’s lexmark bet pays offMaRKeT callS, ReViSiTed nATHAnIEL E. BAKER

Andrew Rabinowitz

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 4

1 2 3 4 5 6 7

oVeR The hedge

Roman Pay Triples as Man Reinstitutes Bonusman group plc Chief Executive Officer emmanuel roman’s pay more than tripled last

year to $3.4 million after the hedge-fund company’s earnings rose and its share price increased for the first time since 2009.

Roman, 50, received a salary of $1 million and bonus payments valued at $2.3 million, the world’s largest publicly traded hedge-fund manager said in its annual report on Mon-day. Roman’s salary was unchanged from 2012, when he received no bonuses.

Roman’s cost cuts helped push London-based Man Group’s adjusted pretax profit up 8 percent to $297 million in 2013, and he also restructured management in response to client redemptions and losses posted by the firm’s biggest hedge fund, AHL Diversified. The shares gained 2.7 percent last year after plunging 73 percent from the end of 2009 through 2012.

Finance chief Jonathan sorrell’s pay increased 42 percent to $2.6 million, according to the annual report. He received $625,000 in salary and $1.9 million of bonus payments last year. Sorrell, a former Goldman Sachs Group Inc. banker, became a Man Group di-rector in June 2012, so his salary of $336,407 for that year only reflects about six months, the company said.

The board awarded Roman’s bonus payments based on the CEO meeting objectives such as cutting jobs, overhauling management and increasing sales of investment prod-ucts, according to the annual report. The company fell short of its targets for revenue and earnings growth, the report said.

— Jesse Westbrook

■ All hedge fund strategies posted positive returns in February, accord-ing to a report by eurekahedge pte. Long-short equity managers delivered gains of 2.4 percent, while distressed debt funds posted gains of 2.3 percent, the eighth consecu-tive month of positive returns, the report, published on March 11, said. Multi-strategy, arbitrage and fixed income hedge funds rose 1.6 per-cent, 1.2 percent and 1.2 percent, respectively, while managers de-ploying macro strategies rebounded from their January losses to finish the month with gains of 1.3 percent, the report said. Managers utilising systematic or trend-following strate-gies posted gains of 2.2 percent during the month, the report, titled the ‘Eurekahedge March Index Flash’, said.

■ CTAs and global macros appear to be particularly well-positioned to benefit from positive surprises in the euro area if the recovery ac-celerates, according to a report by lyxor asset management. “These views are expressed through long positions in equities and sovereign bonds,” Philippe Ferreira, head of research of the managed account platform, said in the report. Long-short credit funds would also post gains on the tightening in euro area credit spreads given “significant exposures” to Greece, Ireland and Portugal, the report, based on data as of Feb. 18, said. Concerns over emerging markets are “very unlikely” to impact hedge fund performance, the report, published on March 11, said. “CTAs and long-short credit funds would be mostly negatively impacted by the rise in EM bond spreads. The fall in EM currencies would also generate losses for CTAs,” Ferreira said in the report, titled ‘Stress Testing Hedge Fund Portfolios: Resilience is a Virtue’.

— Darshini Shah

ReSeaRch Round-uPwhen it recovered, he said.

The founder of the $18 billion, new york-based investment firm also said phone-book publishers are “at an inflection point.” GoldenTree, the second-largest investor in Cana-da’s yellow Media Ltd., sold about 43 percent of its shares in the publisher from October to Jan. 7, according to data compiled by Bloomberg. yellow Media handed control to creditors in 2012 in exchange for writing down most of its debt. Its stock has more than doubled in the past year.

“I wish there’d be another opportunity like yellow Media in Canada,” Tananbaum said in an interview following his panel appearance.

Italy’s Seat Pagine Gialle SpA may follow a similar recovery, he said during the panel discussion. Like yellow Media, Seat swapped debt for equity as part of a bankruptcy plan that that will help it shift more of its business to digital media, Tananbaum said.

— Cecile Gutscher and Jody Shenn

gottlieb says he likes consumer stocks Including nikeJacob Gottlieb, founder of $6.5 billion hedge-fund firm Visium Asset Management LP,

said nike Inc. is among the consumer stocks he likes.Gottlieb also likes technology stocks, especially those with a “mobility, Internet and retail

theme,” he said on a panel discussion at the Absolute Return Symposium this week.— Saijel Kishan

market calls...

LOOKUP YOUR FUND WITH ONE CLICK FL <

GO

>

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 5

1 2 3 4 5 6 7

daTe eVenT FeaTuRing locaTion conTacT / RegiSTRaTion

March 25 HedgePo.com's Investors Choice Hedge Fund Awards 2014

Winners are determined by institutional investors "taking into account more than just performance." The Dorchester, London http://bit.ly/1gaxAgS

March 26 - 27 BHA Select Hedge Funds: London "Invitation-only cap intro event" bringing together

75 managers and "over 150 investors." Stamford Bridge, London http://bit.ly/19zBI0M

March 27, 7:30pm HFC UK Sprint Networking Evening Cocktails and drink with canapes. Boujis, London http://bit.ly/1imEf5V

April 24 Morgan Stanley Emerging Manager Hedge Fund Summit Capital introductions event. London (location

provided to attendees)Private event by invitation only.

April 29-30 HFI's EuroHedge Summit 2014 The event addresses "the overall outlook for the

hedge fund industry". Palais de la Bourse, Paris http://bit.ly/1cp8sSm

May 7 IIR's Hedge Fund Startup Forum"Leading event for those looking to start a hedge fund" with "key insights into starting and main-taining a successful hedge fund".

London http://bit.ly/1qUgG9As or e-mail: kmregistrations@informa.com

May 15 aiCIO European Innovation Awards First European event. Awards for 11 categories. The Savoy, London http://bit.ly/1igUz8I

May 19-21 Global Arc London Franklin Allen, Wharton; Noam Chomsky, MIT; Mark Blyth, Brown University. The Landmark Hotel, London www.global-arc.net

May 22 Hedge Funds Review 14th Annual European Single Manager Awards 2014

A black-tie event recognizing "the best hedge funds in Europe"

Park Lane Hotel, Piccadilly, London

E-mail: margie.lindsay@incisivemedia.com

June 4-6 Opal Group's European Family Office & Private Wealth Management Forum

"Three days of engaging discussions and great networking opportunities." Geneva opalgroup.net

calendaR oF eVenTS: euRoPe TO SUBMIT An EVEnT EMAIL HEDGEBRIEF@BLOOMBERG.nET.

w w w. g l o b a l r e a l e s t a t e . o r gGRI meetings provide a forum for the world’s leading real estate players to develop valuable relationships, find new business par tners, and strengthen their global networks.

Roland FuchsHead of European Real Estate FinanceALLIANZ REAL ESTATE

Michel VauclairSenior Vice PresidentOXFORD PROPERTIES

Anne BraunExecutive DirectorDUNDEE INTERNATIONAL

Dr. Christoph SchumacherManaging DirectorUNION INVESTMENT INSTITUTIONAL PROPERTY

J o i n R e a l E s t a t e I nv e s t m e n t L e a d e r s i n E u r o p e

P l e a s e v i s i t we b s i te fo r u p - to - d ate p a r t i c i p a nt l i s t and many more.. .

ESPAÑA GRI 2014

Madrid, 20-21 May

ESPAÑAGRI2014

BRITISH GRI 2014

London, 29-30 AprilBRITISH

GRI2014

GRI EUROPE SUMMIT 2014 Paris, 17-18 September

GRI EUROPE SUMMIT 2014

DEUTSCHEGRI2014

FRANKFURT 7-8 MAY

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 6

1 2 3 4 5 6 7

SPoTlighT

david simon, founder and chief executive officer of new york-based twin capital man-agement, spoke to nathaniel Baker about his quarter century of investing experience and why REITs and airlines are worth buying.

Q: the fund has been around for a while. how did you get your start?a: I worked as a corporate attorney for two years and then I went to Spear Leeds & Kellogg. I worked for Dave nolan, who was the head of the entire trading opera-tion. He was a great person to learn from because it taught me a style of investing that differentiates us from everybody else. We look for the best risk/reward opportu-nity rather than just mechanically putting on a standard risk arbitrage spread. I worked for Dave for two years and then I went to Mercury Securities, which was run by Hank Bayer and Bill Hyman. After the crash of 1987 I started trading my own account very aggressively. I started Twin Securities in 1988 and ran in the form of managed accounts that all traded pari passu until 1995. Then I converted it to Twin Securities LP. In 2002 I formed Twin Offshore Limited. That brings us up to today. I’ve been in business for 26 years and only had one down year, 2002.

Q: you were up in 2008?a: yes we started that year horribly. Were down 6.75 percent in January and ended up returning over 6.5 percent on the year.

Q: okay so tell me about the strategy?a: It really goes into three buckets: special situations, risk arbitrage, and undervalued with a catalyst. We like to say that a lot of our ideas are risk arb-centric. We made a lot of money last year from risk arbitrage announcements. We made it from buying either both the acquirer and the target or just the acquirer. We were more profitable last year just buying the acquirer.

Q: why is that?a: Because the deals were so accretive and were so positive for the acquirer. The synergies and everything else were just amazing. Also cash is worth zero.

Twin capital ceo Simon on Buying opportunities in ReiTs, airline companies

age: 56

hometown: Livingston, New Jersey

education: Muhlenburg College, University of Miami Law School

hobbies: Golf, tennis, working out

charitable Work: Vice Chairman of HELP USA Charity Golf Outing

Recommended Recent Reading: Steve Jobs’ biography

Favorite new York city Restaurant: Carbonne

Who will win the ncaa men’s basketball tournament: Florida

your cash in the bank is earning 25 basis points and if you buy a company you get over an 8 percent return using your cash right away providing you pay a reasonable price. It’s a good time to do acquisitions.

Q: Is there any type of sector focus?a: no, we play just about everything. We tend to concentrate. We think there are three ways to make money in the stock market: Be totally long and hope it goes up, be very leveraged and try to squeeze blood from a stone, or concentrate your best ideas. We look at it in the context of a bond portfolio of 50 bonds. 15-20 are rated AAA and 30-35 are rated B or below and they all yield 8 percent. Why would I want to own, for the sake of diversification, the other 30-35? We want to own 15 to 20 situations or stocks, knowing them better than everybody else through deep-dive re-search, which entails meeting every CEO and knowing every competitor, so we aren’t surprised. We can take advantage of lulls versus positive times, to get longer or try to hedge out risk if we believe the catalyst we are wainting for has a longer time horizon. Things like that.

Q: how long do you hold stocks?a: The average holding period is about four to six months.

Q: where are the opportunities now?a: We think there’s a lot of opportunity in the REIT space, such as private REITs selling to public REITs, and REIT conver-sions such as outdoor advertising com-panies. We believe some will go through

and some won’t. We like to think we are picking the ones that will go through and are very undervalued. The reason they’re undervalued is that the government put a hold on allowing these things to happen for about nine months until it came up with rules. We think they’re going to start approving them shortly. We think there’s a big opportunity in the rental car business and airlines. There are now three major airlines and three major rental car compa-nies. All these industries are not looking to undercut one another and they realize that they all need to make money. Airlines for years didn’t make money. now they should consistently make money.

Q: because there’s less competition?a: And there’s less capacity. They have more efficient planes. It’s really become a much smarter business. It’s not something where travelers are that comfortable. The average coach seat I think went from 18 inches to 15 inches. The old coach seat is in first class now. They’re squeezing everything they can out of the business. It could be very profitable.

Q: what about the fundraising side?a: We grew the fund over the last year and a half from about $350 million to $700 million and stopped taking new money until we staffed up. We recently added an excellent new CFO and we were fortunate that one of our analysts who left us two years ago has rejoined us. We believe in controlled growth and now that we are fully staffed we hope to continue to add to our funds under management.

03.21.14 www.bloombergbriefs.com bloomberg brief | hedge funds europe 7

Economics China Brief London (free brief)

Economics Europe Economics Asia Mergers

Hedge Funds Europe Hedge Funds Municipal Market

Financial Regulation Private Equity Leveraged Finance

Structured Notes Technical Strategies Clean Energy & Carbon

Healthcare Finance Oil Buyer’s Guide Bankruptcy & Restructuring