AIN121806 12/14/06 6:47 PM Page 1 project financing ever organized in the U.K. ... according to Barclays Capital. ... Knight.com/DirectEdgeECN

Chapman GoesHeadhuntingRobert Chapman’s activist firm iscalling for the removal of two boardmembers at Vitesse SemiconductorCorporation.

See story page 4

At Press TimePentium Plots ABL FoF 2

U.S. NewsJohn Henry Bounces Back 3Chapman Seeks To Oust Vitesse

Board Members 4Westchester Firm Opens Fund 4Credit Suisse Eyes Alts Expansion 5New Mexico Seeks Hedge Funds 5

European NewsShooter Reopens Main Fund 6Citi Gets Sales Pro For Germany 6Swiss Firm Eyes Institutions 6London Scheme Makes First Private

Equity Foray 6

News From Other PortsBuenos Aires Firm Setting Up

In N.Y. 8

DepartmentsData Zone 8Living On The Hedge

With Logan Short 11

COPYRIGHT NOTICE: No part of this publication maybe copied, photocopied or duplicated in any form or byany means without Institutional Investor’s prior writtenconsent. Copying of this publication is in violation of theFederal Copyright Law (17 USC 101 et seq.). Violatorsmay be subject to criminal penalties as well as liabilityfor substantial monetary damages, including statutorydamages up to $100,000 per infringement, costs andattorney’s fees. Copyright 2006 Institutional Investor,Inc. All rights reserved. ISSN# 1544-7596

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DECEMBER 18, 2006VOL. VII, NO. 50

SIDE LETTERS IN SEC ENFORCEMENT SIGHTSThe Securities and Exchange Commission is homing in on hedge funds’ side letters,reports AIN sister publication Compliance Reporter. Bruce Karpati, assistant regional direc-tor at the SEC in New York, told a Financial Research Associates conference last Tuesdaythat there is a concern at the SEC that side letters are not fully disclosed.

Ricardo Davidovich, partner at Tannenbaum Helpern Syracuse & Hirschtritt in NewYork, said the SEC has been requesting side letters during examinations and they have beenappearing on document request lists. Side letters are common, but an enforcement action

(continued on page 11)

Getting IntellectualGOLDMAN TEAM READIES ASIAN L/S STRATA cadre of officials from Goldman Sachs has formed CittaCapital Management and is planning to launch along/short fund that will invest in Asian equities. Led byNick Ricciardi, who managed equity derivatives,structuring and risk arbitrage in Japan for Goldman, Cittais planning to kick off the fund in February with around$100 million, said Joe Wat, formerly a proprietary equity


Buying In?HOMM’S FIRM MULLS ACQUIRING ABL, REAL ESTATE FUNDSFlorian Homm’s Absolute Capital Management is considering acquiring boutiquesfocused on asset-based lending (ABL) and real estate as the Palma de Mallorca, Spain-based firm expands out of long/short strategies for the first time. No decision has beenmade about the size of these potential acquisition targets. The firm runs eight funds butplans to broaden its platform to offer a more diverse range of strategies to investors, said


EX-SOROS GROUP RETURNS 30%+ IN YEAR ONEIn a year when many hedge funds, particularly fixed income strategies, have underperformedmarket indexes, George Soros’ former credit group Camulos Capital has returned more than30% in its first full year of trading. Through Nov. 30, its $1.6 billion Camulos Partners fundhas returned 30.6%, according to data kept by the Swiss private bank Syz & Co. Afterspinning off from Soros Fund Management a year ago last summer (AIN, 5/27/05), themulti-strategy fixed-income play launched in November and has amassed an annualized returnclose to 27%. A spokesman for the firm declined to comment. (continued on page 11)

AIN121806 12/14/06 6:47 PM Page 1

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Pentium Plans ABL FoFPentium Fund, a $500 million Swiss hedge fund firm, will

launch an asset-based lending fund of funds early next year.The fund will invest in a very concentrated portfolio of around five

managers and will launch with about $50 million of firm capital, said VicenteZaragoza, ceo. It will be highly leveraged and aimed at large investors, he noted.“It’s not really meant for small investors; it’s more for people buying heavyweightassets,” he explained. To reflect this, the fund will have a $1 million investmentminimum. The fund will charge a 1.5/15 fee structure.

Pentium is the latest firm to move into ABL, which remains a fairly nichestrategy. Some larger firms, including Eden Rock Capital Management andGottex Fund Management, already manage ABL funds of funds. Meanwhile,Florian Homm’s Absolute Capital Management is considering acquiring an ABLboutique (see story, page 1). It is thought there are around 150 single-managerABL funds globally.

Prior to the ABL fund, Pentium is also planning to launch a fund of ‘closed’hedge funds (iialternatives.com, 9/29). This is set for Jan. 1, said Zaragoza. It willbe launched with firm money but around 25 investors have expressed interest, headded.

Goldman, Cargill Scope Retooling Ex-EnronU.K. PlantGoldman Sachs and Cargill, part of a group that owns northeast Englandgeneration facility Teesside, are looking at restructuring the 1.875 GW facility,which was originally developed by Enron, reports AIN sister publication PowerFinance & Risk.

Turnaround advisory firm Kroll Zolfo Cooper in London has been tapped tohelp rework the gas-fired operation with an eye toward squeezing betteroperational performance out of the asset as well as assisting the plant’s privateequity and hedge fund investors formulate an exit strategy, according to officialsfamiliar with the situation. Officials at Kroll declined comment, as did aGoldman official, and Cargill executives did not return a call for comment.

Teesside was placed in operation in 1993 and was funded using the secondlargest project financing ever organized in the U.K. It became a distressed asset inthe wake of the collapse of Enron and British Energy, the largest offtaker. It nowoperates under the name Teesside Power Holding and also has a fund-raisingsubsidiary known as Teesside Power Financing.

The owners are hoping that Kroll can apply many of the lessons it learned inreworking the 2.2 GW portfolio of Entegra Power Group.

At Press Time

Tell Us What You Think!Questions? Comments? Criticisms? Do you have something to say about a story that appearedin AIN? Or is there information you’d like to see published? Whether you’re irate with yourboss, would like to discuss a new business strategy or crow about a big hire, give us a call.Managing Editor Nathaniel Baker can be reached at 212-224-3648 [email protected].

AIN121806 12/14/06 6:32 PM Page 2

John Henry Rebounds In NovemberManaged futures giant John W. Henry &Company bounced back in November after atough showing the previous month. Thefirm, which is run by Boston Red Sox ownerJohn Henry, saw all its strategies post gainsfor the month at a time when most of itsfunds have been on a losing streak for theyear (AIN, 11/13).

Leading the way was the Dollar Program, which returned10.8% for the month. A strong decline in the greenback caused itto tumble to a 20-month low versus the euro, according to aninvestor letter. “The dollar broke out of its six month trading rangeon growing expectations that a slowdown in the U.S. economywill make dollar-denominated assets less attractive to investors,”the letter says. The program, however, is still -27.08% for the year.

The firm’s diversified portfolios were buoyed by a cornrally. “The corn market was the biggest gainer in thecommodity sector with the largest three month rally since1973 and the highest price level in the last 10 years,” statesthe letter. Corn benefited from low inventories and a growingdemand for ethanol, it notes. The Global Diversified Portfoliowas up 6.66% for the month, while the JWH GlobalAnalyticsstrategy returned 5.86%. Year-to-date the programs havereturned -2.08 and -0.48, respectively.

The flagship Strategic Allocation Program returned 6.29% forthe month and is down -6.9% for the year. Calls to MarkRzepczynski, president and cio, were not returned by press time.

Pension, Far East Investors SeenDriving Commodities InflowsLarge U.S. pensions like CalPERS are combining with buddinginterest from Asian investors, particularly those in Korea andJapan, to drive the next wave of inflows into commodities-linkedinvestments, according to Barclays Capital. “In terms of areaswhere I can see a large increase, those two dominate,” saidKamal Naqvi, the firm’s director of commodities sales, at abriefing held by the firm last week.

The past few years have seen a massive influx intocommodities assets, as investors have sought refuge from inflationand the rising price of oil and other natural resources. With manycommodities prices declining this summer, and many investorssufficiently allocated to the sector, “a question people have is, ‘is itall over?’” said Naqvi. Yet of 120 buyside clients polled byBarclays, only 8% expect commodities assets to shrink from their

December 18, 2006 www.iialternatives.com Alternative Investment News

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U.S. News

estimated $90 billion level over the next two years. Thirty-sixpercent foresee a substantial increase by 60% or more, to $150billion, with 32% envisioning a jump of 30-60% to $120-150billion. The remaining 24% anticipate an increase of 30% or less,to $60-90 billion.

Underlying the flow of assets to the sector are strongfundamentals supporting higher prices for nearly allcommodities, said Kevin Norrish, the firm’s director ofcommodities research. Specifically, shortfalls in oil andgasoline supplies in the U.S. are expected to drive demandand with it, prices, in the approaching winter months. Theproblem will not ease even then, however. Supply weakness“will probably be with us the next nine, 10 years or so,” saidNorrish. Increased demand from China—not only for oil butalso for industrial metals such as copper and agriculturalcommodities such as corn—will further drive prices, henoted. While copper is a popular short these days, Norrishsaid there is still substantial upside. But he is more bullish onoil, which he said “will recover and recover strongly.” For nextyear, the firm is predicting an average of $76/barrel with amonthly average of over $80/barrel next quarter.

John Henry

AIN121806 12/14/06 6:32 PM Page 3



U.S. News (cont’d)

Westchester Shop Opens Fund ToOutside InvestorsBronxville, N.Y.-based Wheelhouse Capital is opening itsWheelhouse Partners I fund to outside investors nextmonth. The long/short equity fund, which trades ETFsubsectors of the S&P 500, started trading in September(AIN, 8/14). “We expect 2007 to be a strong year for us,” saidManaging Partner Chuck Bryceland.

Last month, the fund returned 1.99%, which was 34 basispoints better than the S&P 500, states a report sent by the firmto its investors. During the month the fund reduced exposure tothe healthcare and financial sectors and increased exposure atmonth end to the technology, industrial and materials sectors, itadds. “We expect the positive direction of the S&P to continueinto year end with a target closing value of 1415-1420 for yearend,” the letter predicts.

Since launch on Sept. 5, the fund has returned 9.35%, whichis 2.51% better than the broader S&P 500 index.

Owl Creek Keeps Pressure On Northwest Owl Creek Asset Management, the New York hedge fundfirm run by Jeff Altman, is ratcheting up the pressure onNorthwest Airlines after the airline moved to hire advisoryfirm Evercore Partners to explore strategic alternatives. “Asyou know, the term ‘strategic alternative’ is investmentbanker-speak for the merger, acquisition or consolidationtransaction of which Owl Creek advised in its [previous]letter,” the firm wrote in a letter to the trustee. The hedgefund had previously lobbied the bankruptcy trustee to createthe committee following U.S. Airways’ recent bid for DeltaAirlines (AIN, 12/4).

Northwest is guaranteeing Evercore a minimum fee of$3.45 million plus an additional $2 million upon thecompletion of a deal. “The transaction for which Northwesthired Evercore will enhance equity value, but Northwest’sshareholders will only fully realize that value if you appoint aNorthwest Equity Committee to protect their interests,” theletter says. “Evercore gets paid for consummating atransaction; not for getting the best transaction for all ofNorthwest’s…shareholders,” it adds.

Owl Creek, which owns 5% of the company’s shares, wantsa seat at the table because so far only creditors are representedand it feels shareholders are unprotected. “Northwest and itsstatutory committees act only for creditors; Northwest has

said already that it (unlike the market) views equity as out ofthe money,” the letter says.

Shares of Northwest were trading around $5.7 last week. Callsto Owl Creek were not returned by press time. A Northwestspokesman declined to comment. A spokeswoman for the U.S.trustee said a shareholders committee was under construction.

Chapman Calls For Vitesse Directors’ HeadsChapman Capital, the activist firm run byRobert Chapman, is calling for the removalof two board members from troubledVitesse Semiconductor Corporation. Thecompany is being investigated by the U.S.Attorney for the Southern District of NewYork and the Securities and Exchange

Commission for improperly granting back-dated stock optionsto executives. Chapman is now calling for the ouster of boardmembers James Cole, founder of venture capital WindwardVentures, and former CEO Louis Tomasetta.

The company has already terminated Tomasetta, CFOYatin Mody and executive v.p. Eugene Hovanec, for theiralleged roles in the options scandal (AIN, 7/24) butTomasetta is still a member of the board of directors. “Coleserved on the compensation committee that allegedly issuedbackdated stock options, served on the audit committee thatallegedly signed off on potentially misstated auditedfinancials, and chaired the nominating and corporategovernance committee that seems to have allowed corporateoversight to run terribly awry,” according to a letter fromChapman to the board.

Chapman is also suspect of the friendly relationship betweenCole and Tomasetta, with Tomasetta serving as a director of aWindward portfolio company, according to the letter. “[It’s] adubious proposition that Vitesse director Cole, properly andwithout conflict, could oversee, reward and discipline Tomasettawhile the latter served as a director himself of a private companyin which Cole, via Windward Ventures, had a sizable financialand voting interest,” the letter says.

“However illegitimate their directorships may be,Chapman Capital believes that Tomasetta and Cole haveulterior (non-fiduciary) motives to keep their ‘sheriff badges’pinned onto their pinstriped lapels, and as such do notappear willing to resign on their own volition,” Chapmanwrote. Calls to Chapman, Cole and Vitesse were not returnedby press time.

Robert Chapman

AIN121806 12/14/06 6:32 PM Page 4


Copying prohibited without the permission of the publisher. 5

Credit Suisse Private Bank PlansAlts GrowthCredit Suisse Private Bank plans to expand its alternativeinvestments platform and has brought on board HughNeuburger, previously managing director with the bank’s assetmanagement division, to spearhead the efforts, reports AIN sisterpublication Private Asset Management. Additionally, it has kickedoff in-house training sessions for the bank’s approximately 300relationship managers in an effort to familiarize them with thefirm’s full line of alternative products, said Dale Miller, head ofinvestment products for private banking Americas.

The firm is expanding its fund offerings in the private equityand hedge fund space given high-net-worth clients’ strongappetite for these offerings, Miller said, adding that the push ispart of expansionary plans for the private bank in the U.S. Thefirm is looking to sign on relationship managers at the seniorlevel. Neuburger, who joins the new post in a client-facing role,is responsible for developing new alternative products such asprivate equity, hedge funds and fund of funds. He also acts as aliaison between the private bank and the alternative capital andinvestment banking divisions, and is based in New York,reporting directly to Miller.

Credit Suisse currently offers internal and external private equityfunds, single and multi-manager hedge funds and funds of funds.

New Mexico Begins Hedge Fund Searches The $12 billion New Mexico Public Employees RetirementAssociation, which earlier this year set a 5% target hedge fundallocation, will start seeking managers in earnest next month,reports AIN sister publication Money Management Letter. Theplan aims to hire approximately 20 hedge funds over the nexttwo years, and starting in January, it will select two or three permonth, said Bob Gish, investment director. Most will be directinvestments, but the board has decided that up to$120 million—a fifth of its hedge fund exposure—can beinvested in special situation funds of funds. It has so far invested$30 million with Farallon Capital Management.

Studies have shown that over-diversification of hedge fundscan erode returns and investing directly should save on fees, Gishexplained. Hedge funds that want to be considered shouldcontact Cliffwater, which is “acting as our gatekeeper.” NewMexico’s hedge fund portfolio will primarily include long/shortequity, event driven, multi-strategy, market neutral or globalhedge funds. The plan will select mostly absolute returnstrategies. The hedge fund stake will mostly be funded out of the

U.S. News (cont’d)

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plan’s 35% fixed-income allocation. The board is also working tofill a 5% target to private equity and 2.5% to real assets.

U.S. Trust Creates Alternative SlotU.S. Trust has tapped David Upson, former managing directorwith Fairfield Greenwich Group, as managing director and seniorhedge fund research analyst for firm subsidiary CTC Consulting,according to AIN sister publication Private Asset Management.Upson reports to Robin Willoughby, CTC director of hedge fundresearch and joins an 11-person team in charge of hedge fundresearch at CTC. The hire is seen as part of the trust company’splans to expand its alternative investments platform by more than25% over the next year. CTC Consulting, which caters to clientswith more than $100 million in investable assets, provides research,asset class valuation and manager selection for clients’ portfolios.

At Fairfield Greenwich, Upson was responsible forinvestments in currency and fixed-income strategies andserved as principal for the team in charge of fund managers’selection. Prior to that he was a principal at Virgin Islands-based Denali Asset Management. Calls to Upson werereferred to a firm spokeswoman.

AIN121806 12/14/06 6:32 PM Page 5



European News

Shooter Reopens FlagshipLondon’s Shooter FundManagement isreopening its flagshipShooter Multi-StrategyFund after seven months.The firm decided to “takein a limited amount ofcapital—around

$100 million,” said David Beddington, chief operating officer.Shooter closed the $550 million fund after a 2.1% drawdown

this May (AIN, 6/26). That decision was “a matter ofprinciple…we just felt we shouldn’t make money if [investors]aren’t making money,” Beddington told AIN at the time. Thefund has since rebounded, returning 7.88% from June throughNovember, pushing year-to-date returns to 10.14%.

Beddington said the firm is targeting “sticky money” frominstitutions. By the first quarter, he expects the fund to beclosed again.

Council Hires BGI For TransitionBath & North East Somerset Council has hired Barclays GlobalInvestors as transition manager for the £2 billion Avon PensionFund it administers, according to AIN sister publication GlobalMoney Management. The scheme recently completed anasset/liability study that encouraged it to move away fromtraditional equity and bonds investments.

Instead, the scheme will be investing in unconstrained equity,emerging market equity, overseas indexation equity, hedge funds offunds, bonds and property. BGI will smoothly handle thattransition, a fund official said. Esther Nass-Fetzmann,spokeswoman at BGI in London, did not return calls by press time.

Citi Lines Up Sales Pro For German MarketCitigroup Alternative Investments has lined up an individualto focus on institutional sales in Germany. The individual willjoin the firm in January and will be based in Frankfurt—thefirst member of the firm’s European sales team to be basedlocally in their jurisdiction, rather than in London, said PhilipAnker, managing director, head of European sales, whodeclined to name the hire.

The firm has been without a dedicated sales pro for thecountry since the departure of David Barker, who left in Aprilfor personal reasons, said Anker. Since Barker’s exit, Anker has

focused a lot of his own efforts on Germany. The firm raisedabout $350 million from German investors this year, he said.

Threadneedle Lines Up Strategy ProThreadneedle Investments, the London-based asset managementfirm, has lined up a new investment specialist. The new hire willwork with Stephane Jeannin in a role that bridges the firm’s fundmanagement and sales efforts and advises the sales team onThreadneedle’s alternative investment strategies. Jeannin said theindividual will join the firm shortly, but declined to name him orher. The vacant slot was previously filled by Ramona Glass, whomoved into a product development role in May.

Swiss Start-Up To Target InstitutionsRose & Sky Investments, a Pfäffikon, Switzerland-basedstart-up hedge fund firm, will make its first push for assetsearly next year and will begin by targeting institutionalinvestors. The firm rolled out its market-neutral Europeanequity fund in April, but it remains quite small, said BrunoBlattner, head of marketing, who declined to provide a figureor go into further details about the fund. The firm has notsought to grow assets until now, preferring to focus onbuilding a track record. The fund is up 15% for its first sixmonths to the end of October, he said.

London Scheme Makes MaidenForay Into Private EquityThe £580 London Borough of Haringey Superannuation Fundis seeking to hire its first private equity manager for a£29 million brief, reports AIN sister publication Global MoneyManagement. The move follows a recent study conducted byconsultant Hymans Robertson which advised the scheme toreview its entire asset mix.

An official at the fund confirmed the private equity mandate,which makes up 5% of its total assets, is to be invested throughfunds of funds. He referred further questions to John Hardy,head of corporate finance, who did not return calls by press time.

The deadline to participate is Jan. 15 and Hymans is assisting.It is not known how the mandate will be funded, although thereview has recommended the scheme reduce its high U.K. equityexposure of approximately 70% of assets.

The review has also suggested the scheme increase its realestate investments to 10% from 6% and apply a currencyhedging strategy to 50% of its total assets. The official declinedto comment on this.

The Shooter Team

AIN121806 12/14/06 6:32 PM Page 6

GGLOBAL ORGANIZERS OF INSTITUTIONALFINANCE & INVESTMENT CONFERENCESGGLOBAL ORGANIZERS OF INSTITUTIONALFINANCE & INVESTMENT CONFERENCES

ABPAegon USA Investment Management, LLCAIG Global Investment GroupAllegheny CountyAllstate Investments, LLCAmerican Beacon AdvisorsArizona State Retirement SystemCalPERSCreighton UniversityDeseret Trust Company

Deutsche Asset ManagementFederated InvestorsFresno Fire & Police RetirementSystemGeneral Motors Asset ManagementGreat Pacific SecuritiesHouston Municipal EmployeesPension SystemIBM Retirement FundsIndependent Bankers' BankState Of IowaJacksonville Police & Fire Retirement Fund

Commonwealth Of KentuckyLincoln Financial GroupMFC Global Investments Michigan Department of TreasuryBureau Of InvestmentsMorgan StanleyNew Mexico Educational Retirement BoardNew Orleans Board of RetirementNY State TeachersOhio Police & Fire Pension Fund

Ohio Public Employees Retirement SystemPacific Life Insurance CompanyPGGMPhoenix Retirees AssociationPioneer Asset Management Principal Financial GroupPrudential Investment ManagementRussell Investment GroupSCF ArizonaSouthern Company

Sun Life FinancialTexas Municipal Retirement SystemThe University Of North Carolina AtChapel HillThomas Edison State CollegeComptroller's OfficeThrivent Financial For LutheransTIAA-CREFUniversity Of California RegentsVanguardWashington State Treasurer's Office

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LONG/SHORT HEDGE FUNDSThe table below displays some of last month’s top performing long/short managers, according to data provided by Eurekahedge.

Nov ‘06 ‘06 YTD 2005 Annualised Sharpe AuMFund Manager Region Return return return Std Deviation Ratio (US$ Mln)Trophy Fund Winnington Capital Asia 24.65 300.43 -25.95 56.29 1.07 225

BTR Global Opportunity Fund (Class D) Salida Capital North America 9.47 63.00 16.85 21.32 2.75 120

Telligent Greater China Fund Telligent Investment Management Asia 10.23 59.93 11.33 15.72 1.64 103

Firebird Republics Fund Firebird Management Europe 9.67 58.87 57.68 31.35 0.75 638

Martin Currie China Hedge Fund USD Martin Currie Investment Management Asia 6.33 56.41 -9.71 16.49 0.85 59

Dragon Billion Greater China Fund Prime Capital Management Asia 8.22 54.65 25.27 12.01 3.28 434

UFG Russia Select UFG Advisors Europe 8.81 46.61 42.64 22.9 1.86 323

Russian Prosperity Fund - Class A Prosperity Capital Management (Sweden) Europe 10.39 43.86 131.90 49.95 0.58 984

Quorum Fund Quorum Asset Management Europe 11.80 43.32 63.31 35.82 1.11 270

Firebird New Russia Fund Firebird Management Europe 5.73 42.53 65.83 43.83 0.66 379

Firebird Avrora Fund Firebird Management Europe 9.61 41.38 49.83 17.82 2.22 574

Pygar Fund – Class A EUR Fat Tail Capital Europe 3.42 41.24 46.94 19.85 2.13 223

Osiris Investment Partners Osiris Investment Partners North America 11.68 40.61 20.03 22.24 1.08 47

Concentric European Fund - USD Concentric Capital Europe 0.91 37.64 24.13 14.33 1.15 514

Mellon Income FI Açoes Mellon Global Investments Brasil Latin America 6.87 32.49 27.28 21.82 1.68 44

Okumus Opportunity Fund Okumus Capital North America 2.04 32.17 11.62 46.92 0.55 171

Palmyra Capital Institutional Fund Palmyra Capital Advisors North America 0.10 31.44 -1.98 18.33 -0.07 70

Kinetics Partners Kinetics Advisers North America 7.28 31.34 12.47 9.72 1.75 281

HG Strategy II Hedging Griffo Asset Management Latin America 5.34 25.45 25.91 30.44 0.93 63

Explorador Fund Explorador Capital Management Latin America 1.86 22.16 6.81 15.64 1.53 45

Eurekahedge CommentaryGlobal equities maintained their momentum going into November (driven as they were by strong corporate earnings and healthy deal flow); the MSCI World Index rose 2.3% for the month.Among regional equities, despite weak economic data releases and indications of a slowdown in the housing market, the US equity markets were buoyed by a benign inflationary outlook; theS&P500 index rose 1.9% and reached six-year highs in the process. European equities also rallied strongly on the back of positive corporate earnings and high activity levels in the M&Aspace, but reversed direction towards the month’s close, owing to the stronger Euro. But emerging market equities were the biggest gainers during the month (for instance, the MSCI LatinAmerica Index was up 5.3% during November). This pattern was also reflected in the performance of regional long/short equities funds, in a month in which investors positioned themselvesfor the traditional year-end rally (especially in the emerging markets) and managers were mainly focused on their ‘long’ books.

Data Zone

Buenos Aires Firm To Open N.Y. Office

Cima Asset Management, a Buenos Aires-based hedge fundmanager, is in the process of opening an office in New Yorkand has hired a Morgan Stanley private wealth pro, GerryNoejovich, to head the effort.

Noejovich said the impetus for the office is two-fold: to gethim onboard—“I wasn’t going to move to Argentina on apermanent basis,”—and to give Cima an international presenceas it expands. On this end, he hopes to treble assets in the nextfew years and soft-close the firm’s $130 million Cima Aconcagua

Fund. Noejovich spent over a decade at Morgan Stanley, wherehe was also an emerging markets equity trader prior to joiningthe private wealth group in 1997.

The Aconcagua strategy launched in 1998 and has returnednearly 24% on an annualized basis since inception. It takes longand short positions in emerging markets bonds, equities,currencies, commodities and derivatives, focusing on LatinAmerican markets. It is unique for its liquidity—the fundeschews entirely the leveraged carry trade and has self-imposeddiversification parameters and liquidity restrictions, while usingderivatives and other hedging instruments to limit risk andexposure. Cima offers monthly liquidity with no lock-up.

News From Other Ports

AIN121806 12/14/06 6:32 PM Page 8


Copying prohibited without the permission of the publisher. 9

© 2004-2006 Hedgebay Trading Corporation. All rights reserved.

SECONDARY MARKET INDEXThe Hedgebay Secondary Market Premium Index (SMPI) is a proprietary, asset-weighted index derived from secondary markettransactions in non-U.S. based hedge funds effected by or through Hedgebay Trading Corporation and properly authorized broker-dealer licensees. The SMPI shows the average premium paid by buyers for hedge funds that were traded during the applicable month.An investor may wish to use the SMPI as a sentiment indicator to describe hedge fund investors’ future expectations for performance aswell as a benchmarking tool for hedge fund investors to assess possible latent value in their portfolios. Indices have limitations whenused for comparison purposes.

Data Zone (cont’d)

For further information, including identities of the institutions and RFP contacts, please visit iisearches.com or contact Keith Arends at 212-224-3533 or [email protected].

MANDATE SCOREBOARDThe table below shows in $ millions new allocations gained by alternative managers last month.

Firm Amount

PRIVATE EQUITYProvidence Equity Partners 400RCG Longview 125Cerberus Institutional Partners 75J.C. Flowers & Co. 50Energy Capital Partners 50Hellman & Friedman 50Oaktree Capital Management 30Kohlberg Kravis Roberts 20

PRIVATE EQUITY FUNDS OF FUNDSColler Capital 45Parish Capital Advisors 50

VENTURE CAPITALNovak Biddle Venture Partners 3

INFRASTRUCTURELazard Asset Management Pacific 45

Firm Amount

HEDGE FUNDSDavidson Kempner International 100King Street Advisors 100GoldenTree Asset Management 100

HEDGE FUNDS OF FUNDSMassachusetts Pension Reserve Investment Trust 11

COMMODITIESLehman Brothers Asset Management 45

TIMBERLAND/VINEYARDSRMK Timberland Group 1Hancock Timber Resource Group N/A

NATURAL RESOURCESQuantum Energy Partners 15

HedgebayTM SMPI - Asset Weighted

Premium Index Values (SMPI)Composite Index 100.33Relative Value 100.13Secutity Selection 100.40Directional Trading 100.30

AIN121806 12/14/06 6:32 PM Page 9

Project2 9/29/06 11:52 AM Page 1


Indices that track fixed income strategies aresignificantly lower by contrast. Year-to-date, Hedgefund.net’sHFN Fixed Income (Non Arbitrage) Average has returned6.32%; HFN Fixed Income Arbitrage Average 7.92% andHFN Distressed Average 13.13%. Individual funds similar insize to the Camulos strategy have fared even worse: CliffViner’s $1.4 billion III Fund returned 5.7% through Nov.24; Vega Asset Management’s $1.8 billion Vega Relative Value

EX-SOROS GROUP(continued from page 1)

derivatives trader. As a catalyst for its investments, the Citta Japan Fund will

veer from traditional balance sheet analysis and usecompanies’ intellectual property, research and developmentdata instead. The majority of the investments will be inJapan, with some exposure to Korea and Taiwan, said Wat.Eventually, the fund will expand its breadth to include Chinaand India, he added. Since R&D activities typically take timeto produce gains, Citta will hold positions for at least oneyear, which makes the fund a hybrid between a typical hedgefund and a private equity investment, noted Wat. As a result,the fund will have a two-year lockup provision.

Rounding out the team is Minsuk Kim and Yvonne Tse.Ricciardi, a long-time Goldman vet, has been in Asia since 1995and is a mentor to Wat and Kim. Tse, the junior member of theteam, was mentored by Wat. Their firm has offices in HongKong and Kyoto and is mainly pitching the fund to institutionsincluding pensions. There will be a $1 million investmentminimum with fees of 1.5/20.

—Mark Faro

GOLDMAN TEAM(continued from page 1)

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B400101

FrontPoint Shuts DownQuant FundFrontPoint Partners has for the firsttime liquidated one of its funds. TheGreenwich, Conn.-based hedge fundjuggernaut has shut down theQuantitative Equity Strategies (QES) fund.

See story, page 19

At Press TimeEx-Ranger Manager Readies Fund 2

U.S. Searches Ispat Inland Considers Mezz. Search 10Albuquerque School Weighs Funds 12

European Searches French Insurer Seeks Hedge Funds 16Health Charity Makes Foray 16

U.S. Manager NewsFormer Caxton Bond Trader Returns 19Amaranth Unveils Changes 20

European Manager NewsQuadriga Readies Fund 22

News From Other PortsTelstra To Tap Managers 25

DepartmentsMarket Focus

6Search & Hire Directory 18

LONGHORNS TO PLOW INTO ALTSThe University of Texas System’s $11.5 billion endowment funds areseeking to add roughly $575 million in new hedge fund investments thisyear. The funds, which are managed by the University of TexasInvestment Management Company (UTIMCO), currently have a littleover 20% of their assets allocated to hedge funds, and the goal is to havea 25% allocation, said Bob Boldt, cio. The school is leaning towardsinvesting in absolute return funds over other hedge fund styles, Boldt(continued on page 4)

FARALLON FOLLOWS LONE PINE’S LEAD ON HIGH-WATER MARKSFarallon Capital Management, the San Francisco-based hedge fund behemoth run by TomSteyer, is the latest hedge fund manager to propose changes to its high-water markprovisions. As first reported on AIN’s Web site, www.iialternatives.com, the move would putthe firm in line with a growing number of funds adopting changes first proposed last springby Tiger cub Lone Pine Capital that allow hedge fund managers to earn performance feeseven when their funds are under water. Farallon wants the ability to earn a reduced


KLM TO WEIGH FUNDS OF FUNDSThe €8 billion KLM Pensioenfonds, the Amstelveen-basedpension plan for pilots, crew members and ground staff ofKLM Royal Dutch Airlines, may make its first foray intohedge funds of funds this year. Fons Lute, cio of Blue SkyGroup, the money management subsidiary of KLMPensionenfonds, said he plans to recommend a 2-5% allocation tohedge funds of funds at a board meeting in April.


GATE SLAMS ON MILLENNIUM INVESTORSSome investors looking to get out of an offshore fundlast quarter run by multi-billion dollar hedge fund firmMillennium International Management found theywere stuck. That’s because following a guilty plea by aformer senior trader at the Millennium InternationalFund, the fund’s redemption limits were reached,


COPYRIGHT NOTICE: No part of this publication maybe copied, photocopied or duplicated in any form or byany means without Institutional Investor’s prior writtenconsent. Copying of this publication is in violation of theFederal Copyright Law (17 USC 101 et seq.). Violatorsmay be subject to criminal penalties as well as liabilityfor substantial monetary damages, including statutorydamages up to $100,000 per infringement, costs andattorney’s fees. Copyright 2004 Institutional Investor,Inc. All rights reserved.

For information regarding individual subscription rates,please contact Joe Mattiello at (212) 224-3457.For information regarding group subscription rates and electronic licenses, please contact Dan Lalor at(212) 224-3045.

Check www.iialternatives.com during the week for breaking news and updates.

JANUARY 2004VOL. V, NO. 1

Bob Boldt

could, for example, center on hedge fundsfavoring the investors in these arrangementsover others by letting them get out of a fundto avoid a loss, said Barry Greenberg, partnerat Akin Gump Strauss Hauer & Feld inNew York. At issue are the specific rights themanager grants, Greenberg said.

—Sabrina Willmer

SIDE LETTERS(continued from page 1)

Ricardo Davidovich

AIN121806 12/14/06 6:47 PM Page 11



Quote Of The Week“[They] have ulterior (non-fiduciary) motives to keep their ‘sheriffbadges’ pinned onto their pinstriped lapels, and as such do notappear willing to resign on their own volition.” —RobertChapman, head of Chapman Capital, on why he is calling for theremoval of directors from Vitesse Semiconductor Corporation(see story, page 4).

One Year Ago In Alternative Investment NewsWMG Limited, the London-based firm run by MehmetDalman, was planning to launch a fund that invests in musicrights. [Next year the firm has two planned launches. In the firstquarter it is planning to kick off a Pan Asian long/short equityfund (AIN, 10/23). It will be managed by Lena Tan, a formercolleague of Dalman’s at Commerzbank. Also in the cards is aTurkish property offering.]

Some props to the folks at Barclays Capital.Tuesday morning they hosted a conference where

they predict higher oil prices as a result of diminished supply and mixedsignals from OPEC. Wednesday morning oil futures take off due to (drum-roll please) lower-than-expected supply data and shiftiness from OPEC.Well done, lads. Now if only I had followed their advice when it counted.Am I even allowed to do that? Who is in charge of compliance aroundhere, anyway? Huh? What do you mean newsrooms don’t have compli-ance departments? Doesn’t everybody have a compliance departmentnowadays?...Some of these hedge funds appear to have learned theirmanners from East German bureaucrats. Check this out, from PequotCapital Management, in response to somebody who had the nerve torequest attendance at their party:

From: BXXX, Elizabeth [mailto:[email protected]] Sent: Tuesday, December 12, 2006 11:26 AMTo: XXXXSubject: You are not on the list for the NY Investment Professionals Party

To whom it may concern:You are not on the invitation list for the NY Investment ProfessionalsParty 2006. Security is working the door this year and will not allowanyone into the party that is not on the committee’s list.Please contact us early next year to inquire about attendance in 2007.Thank you for your understanding,NY Investment Professionals Committee

Living On The Hedge…An occasional column by Logan Short,an astute industry observer. He can bereached at [email protected].

Fund was down 41 basis points through Nov. 17 and MarkFishman’s $1.5 billion Sailfish Multi-Strat Fixed Income fundreturned 9.69% through Nov. 24, to name three prominentexamples. Some of the fund’s alpha is likely due to an esotericstrategy: aircraft-backed securities, which it had beguntrading last winter (AIN, 10/17/05).

—Nathaniel Baker

Sean Ewing, ceo, who co-founded the $1.2 billion firmwith Homm.

ABL is attractive because it is still a relatively niche strategyand because it is uncorrelated to the markets, said Ewing. “It’sbeen the domain of the investment banks [and] hedge fundsare only beginning to move into it,” he added. EdwardHorner, managing director at London-based fund of fundsfirm Eden Rock Capital Management, estimated there areabout 150 pure ABL hedge funds globally, but that this isgrowing rapidly.

Homm was shot in the chest by armed robbers last month inVenezuela. Fortunately, injuries were not life-threatening andHomm has already returned to work, said Ewing.

—Robert Murray

HOMM’S FIRM(continued from page 1)

NOW GET

alternative investment newsEVERY FRIDAY!

Paid subscribers now have access to a PDF ofthe upcoming Monday’s newsletter on AIN’sWeb site every Friday afternoon before 5 p.m.EDT. That’s a 64 hour jump on mail delivery,even when the post office is on time! Read thenews online at your desk orprint out a copy to readat your leisure overthe weekend. Eitherway, you’ll begetting ourbreaking newseven sooner andstarting your week offfully informed!

AIN121806 12/14/06 6:47 PM Page 12

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AIN121806 12/14/06 6:47 PM Page 1 project financing ever organized in the U.K. ... according to Barclays Capital. ... Knight.com/DirectEdgeECN