EFTA00285853.pdf

d e und www.HFAlertcom ALERT APRIL 10, 2019 Tiger Writing Bigger Checks for Seeding Deals Julian Robertson has increased the amount he's willing to invest with new and 5 OPERATORS OF ONUNE PLATFORMS emerging fund managers. Robertson's Tiger Management, which has been seeding hedge funds for 20 years, 2 Niche Manager Launches Incubator typically deployed $20 million to $25 million per deal, usually in exchange for a cut of the manager's fee revenue. But its two most recent transactions were substantially 2 Wilcox Pulls the Plug on Cider Mill larger. 2 Tourmaline In Talks With Suitors Tiger invested $50 million to $60 million in Yam Square Capital, which began trading on April I. And it provided roughly the same amount of "acceleration" 3 End of the Line for Archer Capital capital to Stony Point Capital, whose 5-year-old fund previously had $48 million 3 Minnesota Startup Gaining Traction of assets, including leverage. The word is that Tiger now is willing to consider even larger deals. 3 Australia Manager Touts 'Best Ideas' The increased check sizes reflect the maturation of the industry since Robertson Sas TIGER on Piga 4 Platform Pros Prep New Offering 8 Capital Flowing to Al Startup Field Street Shutters Fund, Lowers Headcount 10 Forte Offers Prime Services in US Global-macro heavyweight Field Street Capital has liquidated a fund that suf- fered crippling losses last year. 11 LATEST LAUNCHES The New York firm, founded in 2007 by former Lehman Brothers executive Rod Gams, finished returning investor capital from its Field Street Global Investments fund in the last several months. The vehicle had about $220 million under manage- THE GRAPEVINE ment at the start of 2018, but lost half its value in May due to a wrong-way bet on Italian debt. Thomas McKiernan joined Citadel Global The wind-down leaves the firm with just one other vehicle: the flagship Field Equities this month as a portfolio manager Street Partners, which had about $4 billion under management a year ago. The covering industrial-company stocks. Until firm's headcount, meanwhile, has shrunk by about a third in the past year or so. September, McKiernan was at Alyeska Field Street is among the most highly leveraged firms in the industry, with gross Investment — a firm led by former Citadel assets of $73.6 billion as of Feb. 28 — down from $93 billion at yearend 2017. It's Global Equities head Mind Parekh. unclear whether the decrease was the result of redemptions, investment losses, McKiernan also has worked at Madison Sea FIELD on Page 9 Dearborn Partners and Deutsche Bank. A sales and marketing executive has left Online Platforms Catching On With Investors Bridgewater Associates. Shake Rasheed Operators of online managed account platforms appear to be capturing an had joined the Westport, Conn., firm in increasing share of the hedge fund market, with combined assets that now exceed 2016 after stops at Lazard Asset Manage- $100 billion. ment and Citadel. Rasheed's resume also Hedge Fund Alert identified seven firms that use proprietary technology to sim- includes a long tenure at J.P. Morgan. His plify various aspects of investing in hedge funds, from research and manager selec- plans are unknown. Bridgewater is the tion to portfolio monitoring and risk management (see listing on Page 5). While world's largest hedge fund manager, with such platforms first appeared in the late 1990s, asset growth among some of the some $150 billion under management. leading operators has outpaced the industry as a whole in the past five years. HedgeMark, for example, has seen its assets grow from less than $4 billion when it CPP Investment Board hired Yan Kvitko was acquired by BNY Mellon in 2014 to more than $16 billion today. During roughly this month to head emerging-manager the same period, InfraHedge's assets increased to $35.4 billion, from $15.2 billion. investments. Kvitko had been at New InfraHedge is a unit of State Street. Holland Capital of New York since 2006, ICapital Network, which launched in 2014, had about $8 billion invested through See GRAPEVINE on Back Page SIN PLATFORMS an Page 4 EFTA00285853 April 10, 2019 Hedge Fund] 2 ALERT struggled to remain relevant as they have broadly underper- Niche Manager Launches Incubator formed the S&P 500 in both up and down years. A Paris fund shop that trades dividend futures wants to Cider Mill launched in 2016 with $150 million. Its founder, incubate managers running unusual strategies. Thomas Wilcox, had been running his own family office since Melanlon Capital plans to hire an unspecified number of 2011 — when his former employer, Shumway Capital, con- portfolio managers and stake them with about $10 million verted to a family office for Chris Shumway. apiece.If their strategies prove profitable over a period of about Shumway Capital had identified Wilcox as the "single most two years, Melanion would help them raise additional capital profitable individual in our firm's history" after he bet against from outside investors — and possibly spin them off as free- financial-company stocks in 2008, according to Reuters. Cider standing fund operations. Mill, meanwhile, hired a number of former Shumway staffers. Melanion is targeting asset classes that don't fit comfortably Among them: chief operating officer Ken Palumbo, analyst Jeff in the portfolios of institutional investors — whether because Nykun and trader Susan Suh. ❖ they're illiquid, too complex or otherwise too risky. Such strat- egies typically appeal more to family offices and wealthy indi- viduals who aren't constrained by limits on concentration or Tourmaline in Talks With Suitors leverage. Outsourced-trading shop Tourmaline Partners is seeking to "We derived this idea from our launch experience: said sell part or all of its business. Melanion founder and chiefinvestment officer Jad Comalr. "We The Stamford, Conn., firm has been circulating a book couldn't fit in existing asset-allocation pockets. A lot of doors describing its business for a few months. Sources said the idea were closed to us for the wrong reasons: may be to finance a capital-intensive expansion — a project Melanion, which launched in 2013, presents itself as the that would be too small and risky to fund through traditional first alternative-investment manager focused on dividend bank debt. futures. Those instruments, which trade mostly on European To that end, an undisclosed private equity firm apparently exchanges, allow investors to bet on whether public companies has emerged as Tourmaline's top suitor. While it's unclear how will raise their dividend payments. Comair wouldn't disclose large of a stake might be in play, sources said such a buyer could how much money Melanion manages. achieve a solid return even with a minority interest, assuming Melanion joins a small but growing number of hedge fund favorable terms. backers hoping to capitalize on investor demand for niche Rumors also were swirling last week that Tourmaline was strategies. In the fourth quarter, for example, the asset-man- about to strike a deal with Nomura, with the idea that such an agement arm of BTIG began offering seed capital to new and acquisition would complement the bank's Instinet electronic emerging managers, with an initial focus on those running trade-execution unit. But sources said recent financial troubles such credit strategies as bank loans, equipment leases and at Nomura make a deal unlikely. On April 4, for example, the structured products. BTIG has backing from Vista Life & Casu- Tokyo bank said it would cut $1 billion of costs while pulling alty Reinsurance. back from some businesses. Other investment firms focused on niche strategies include Tourmaline works mainly with fund managers that run $50 fund-of-funds manager Eagle's View Capital and multi-strategy million to $100 million apiece. It handles full trading functions fund operators Boothbay Fund Management and Veritlon Fund for some of those clients, while offering others supplemental Management. assistance, help in special situations or customized in-house Melanion is accepting applications for its incubation pro- services. gram at managers@melanion.com. •A Tourmaline was founded in 2011 by Jonathan Goldstein, Daniel Groff, Aaron Hantman and Henry Higdon 3d, who earlier helped launch Williams Trading. The company has 36 staffers in Wilcox Pulls the Plug on Cider Mill Stamford, New York and London, including 27 traders. Cider Mill Investments is shutting down. Tourmaline touts its status as a stand-alone trading busi- The $300 million-plus equity shop will return all capital to ness as offering an advantage over competitors owned by larger investors at the end of this month. Most of its 12 employees companies. About a dozen trading shops cater to hedge funds, already have departed. split evenly between those two ownership structures. In Febru- While there's no official reason for Cider Mill's shutdown, ary, Wooden & Co. agreed to sell itself to Piper Jaffrey for up to volatile performance likely was a cause. The Greenwich, Conn., $73.5 million. ❖ firm's Cider Mill Master Fund was up 11.1% in the first quarter, following a 10.8% loss in 2018 and gains of 12.2% in 2017 and 1.1% in 2016. Need to find the newest funds? The S&P 500 Index was up 13.7% during the first quarter, Subscribers con go to the Databases section of FINklert.com following a 4.4% loss in 2018 and gains of 21.8% in 2017 and and click on 'Latest launches.' 11.6% in 2016. Fundamental equity managers in general have EFTA00285854 April 10, 2019 I Hedge Fund) 3 ALERT loan to a company that offers sales-training services. End of the Line for Archer Capital "Our strategy of smaller, off-the-run opportunities ... is res- Archer Capital is about to shut its doors after 14 years. onating with LPs seeking private-equity returns but concerned The firm, which invested in the debt of distressed mid-size about market cycles and hyper-competition in more conven- companies and pursued special-situation equity plays, told tional strategies and larger deal sizes; Hunter Street partner limited partners in November that it would begin returning Andrew Platt wrote last week in a note to prospective investors. their capital. That process was 80% complete in January and The firm's management team, led by chief executive Neal now is just about finished. Johnson, is made up of alumni from well-known Minnesota- Archer was running $1.3 billion of net assets at its peak in based hedge fund operations including CarVal Investors, Pine 2015. Its gross assets had fallen to $590 million at yearend 2017 River Capital, Varde Partners and Whitebox Advisors. •:* and $407 million at yearend 2018. Most of that consisted of debt products held by the flagship Archer Capital Fund. The decision to disband resulted from a reluctance on the Australia Manager Touts `Best Ideas' parts of portfolio managers Eric Edidln and Joshua Lobel to ask An Australia-focused equity shop has stopped accepting investors to approve a new fund structure they were consider- capital for its highly profitable flagship fund, but continues to ing. market another vehicle whose returns are no less impressive. Most of the firm's other 13 staffers have left, including chief Ophlr Asset Management of Sydney, which takes a long-only operating officer Nell Wlesenberg. But chief financial officer approach to picking stocks of mostly small- and mid-cap com- Kevin Arps remains. The shop's New York office already has shut panies, is showing a 21.2% annualized return for its Ophir High down, but a Beverly Hills outpost where Edidin and Lobel are Conviction Fund since inception in August 2015. The "best ideas" stationed remains open. portfolio gained 6.9% in February and also was up in March. Archer's returns don't appear to have substantially deviated Ophir founders Andrew Mitchell and Steven Ng are mar- from those of similar fund operators in recent years. Archer keting the high-conviction fund to family offices and wealthy Capital Fund was up 2.5% for the first 10 months of 2018, mod- individuals around the world, with assistance from investment estly outpacing the HFRI Event-Driven Distressed/Restructur- director George CMralds. Meanwhile, the firm recently closed ing Index and the HFRI Event-Driven Special Situations Index. the subscription window for its flagship Ophir Opportunities Its 12.7% gain in 2017 also beat the average of those bench- Fund, which has produced an annualized return of 25.3% since marks. The fund gained 4.5% in 2016 and lost 7.4% in 2015. August 2012. That compares to a 7.5% annualized gain for the Amid Archer's unwinding, Lobel started a separate com- S&P/ASX Small Ordinaries Accumulation Index, which tracks pany called Focus RoQ Holdings in November. That operation small-cap Australian stocks. invests in private enterprises in sectors including real estate, In a letter to investors last month, Mitchell and Ng said the healthcare, aerospace and eSports, with an initial deal involv- latest semi-annual reporting period for Australian companies ing a team in Blizzard Entertainment's Overwatch League. Edi- was "somewhat disappointing; din has invested in some deals with Lobel. "The key takeaway after meeting with over 60 companies Lobel and Edidin started Archer in 2005. Lobel previously directly and a further 38 in group settings has been the continu- was a principal at Redwood Capital. Edidin co-headed credit- ing tough conditions facing businesses reliant on the underly- product investing at York Capital. ❖ ing strength of the Australian economy and/or consumer," the letter said. But "while the outlook for the Australian economy near-term remains challenging, we continue to feel the broader Minnesota Startup Gaining Traction small- and mid-cap equities space continues to provide attrac- Hunter Street Partners has landed anchor investors for its tive investment opportunities:" debut fund, which targets niche investments in financially Ophir's flagship vehicle typically holds 30.50 small-cap stressed businesses and real estate. stocks, while the high-conviction fund is a more-concentrated The Minneapolis firm seeks to raise $250 million of equity portfolio of 15-30 small- and mid-cap companies. •:.• for Hunter Street Fund 1. The drawdown vehicle recently closed on commitments from its first two backers — a multi-billion- dollar foundation and a family office. A second close is penciled Need Reprints of an Article? in for June. Meanwhile, the fund has made its first two investments, Want to show your clients and prospects on article or listing that mentions your company? We con reprint any article with a deploying $9 million for the purchase of a portfolio of com- customized layout under Hedge Fund Alert's logo — an ideal mercial buildings and committing $10 million to a program addition to your marketing effort. Contact Keit Hordiman of that will provide housing for people with disabilities. And it has 201.234.3999 or khordiman@hspnews.com. Information on signed letters of intent for two more deals, in which it would reprinted articles is also available on HFAlert.com in the pay $6 million for a deeply discounted pool of workers' com- "Advertise" section. pensation receivables and provide a $15 million senior-secured EFTA00285855 April 10, 2019 ( Hedge Fund) 4 ALERT a key differentiator for the growth of our business!' Platform Pros Prep New Offering The seven online investment platforms identified by Hedge Two former Aon Hewitt Investment executives who had been Fund Alert currently host investors with a total of about $108 developing a managed account platform for the consulting billion deployed mostly to hedge funds, with some exposure giant have teamed up with a former HFR executive to build one to private equity and other alternative-investment strategies. on their own. From 2010 to 2018, assets invested via managed account plat- After Aon scrapped its Vision Hedge Fund Platform late last forms increased at an annualized rate of 13%, versus 9% for the year, Rishl Awatramani and Paul Sylvia began work on a busi- hedge fund industry as a whole, according to a report Credit ness called 4Alts Platform that would provide investors easy Suisse published last year. access to new and emerging fund managers. Joining them in The precise size and scope of the online-platform sector is the effort is John Kfimek, who served as president of HFR Asset difficult to measure because it encompasses firms with a wide Management before resigning in mid-2018. range of business models and product offerings. Some, like Plat- The Arlington Heights, Ill., startup aims to begin adding ten* Strategies, offer a set menu of hedge fund managers, along managers to its platform in the second quarter. It would join with data and analytical tools investors can use to research the seven other firms that use proprietary technology to simplify options. the process of researching, selecting and monitoring fund "We have conducted a rigorous due-diligence process on managers across a range of alternative-investment strategies these managers and provide several means of accessing this (see listing on Page 5). manager information so investors can start their own research Marketing materials 4Alts has distributed both to managers process," said Kettera founder Jon Stein. "Once an investor has and investors say the platform will offer "easier, less-costly and decided on a strategy, we simplify the investment process by more risk-controlled access to alpha from emerging managers!" moving to an online system. Once an investor invests, they are Among its features: relatively low minimum-investment require- able to monitor risks and see performance on a daily basis." ments and daily risk reports. 4Alts also touts a "fiduciary pos- Other platform operators, including InfraHedge and Hedge- ture" that sets it apart from most other platform operators. Mark, take a more customized approach. InfraHedge, for It's unclear why Aon dismantled its Vision initiative. By example, allows investors to choose any manager they want, 2017, it had signed up at least 50 small and mid-size fund- without limit to strategy or region. management companies that were hoping to raise capital via "The open architecture nature of InfraHedge helps inves- the platform. While most were hedge fund operators, Vision tors allocate to any manager in any jurisdiction, negotiate encompassed other types of alternative investments including bespoke fees and terms ... and work with their service provid- private equity and real estate vehicles. Vision charged a plat- ers of choice said Robert Vanderpool, president of InfraHedge's form fee of 15 bp, on top of the manager? fees. North American operations. Sylvia had been at Aon since 2010. He earlier worked with In some respects, InfraHedge's business model has more Klimek at HFR Asset Management, an arm of data tracker in common with traditional multi-manager operations like Hedge Fund Research that offers a variety of investable prod- Pacific Alternative Asset Management than it does with iCapital, ucts. Awatramani, who was head of technology for Aon's Vision say, or Kettera. Paamco also helps clients assemble customized platform, also spent time at HFR Asset Management, where portfolios of hedge funds. But to varying degrees, HedgeMark, from 2007 to 2012 he was a managing director for investment InfraHedge and their peers put a big emphasis on technology. technology. Klimek had worked at HFR since 2004. •:• Lyxor Asset Management, for example, has an online portal called MyLyxorMAP.com that allows clients to monitor profits and losses, market exposures and tracking errors, plus perform Platforms ... Fran Pagel stress tests and other risk-analysis functions. Lyxor, a unit of its platform at yearend 2018. Since then, it has taken over the Societe Generale, offers access to 35 hedge fund managers run- feeder-fund operations of both Bank of America and Morgan ning strategies including long/short equity, long/short credit, Stanley. As a result, iCapital currently services tens of thou- event-driven, global macro and managed futures. sands of investors with a combined S40 billion committed to SocGen was among a handful of banks and asset manag- hedge funds and other alternative-investment strategies. ers, including RBC, that pioneered managed account platforms Global hedge fund assets, meanwhile, increased 18% to $3.1 in the 1990s, creating "structured products" that offered lev- trillion during the five years ended Dec. 31, according to HFR, eraged exposure to hedge funds. The Lyxor Managed Account while assets in funds of funds fell by about 8% to $621 billion. Platform launched in 2002. Joseph Bums, a managing director who oversees hedge fund "Lyxor became the dominant player in the market," said due-diligence at iCapital, said more investors are recognizing Robert Picard, a former Infralledge president who now runs the benefits of accessing private funds via electronic investment consulting firm Rumson Ridge Group of Rumson, N.J. "But the platforms — which make it easy for clients to create custom- credit crisis and Bernard Medoff scandal conspired to undercut ized multi-manager portfolios. "It improves the transparency, the growth of these businesses!" improves the liquidity, drives down the minimum investments, Then, around 2010, firms like HedgeMark and InfraHedge streamlines the process," Burns said. "Leveraging technology is See PLATFORMS on Page EFTA00285856 April 10, 2019 ( Hedge Fund] 5 ALERT Operators of Online Platforms for Hedge Fund Investors Commitments Operator, Via Platform Platform Contact (Shill.) The Skinny Family Office Andrew Schneider Still-developing initiative of Family Office Networks, representing some Networks, andrew@pbtoa.org 10,000 family offices globally. Plans to launch with an Initial 50-100 FON Alts hedge funds, with a focus on small to mid-size managers running capacity-constrained strategies. FON members will get first crack, but platform will be opened to other investors down the road. HedgeMark Ben Yaffee $16,000 Creates bespoke platforms for institutional investors, with virtually ben.yaffee@bnymellon.com unlimited selection of strategies to choose from. Robust technology provides daily performance, exposure and risk metrics. Counts more than 100 clients. HedgeMark acquired by BNY Mellon In 2014. ICapttal Network Lawrence Calcano 40,000 Agreed In March 2019 to buy Morgan Stanley's alternatives feeder-fund Icalcanoeicapitalnetwodccom operation, lifting assets on (Capital's platform by more than 40%. Acquired Bank of America's feeder-fund operation in 2018. Currently offers access to 25 fund managers running strategies including long/short equity, hedged credit, event-driven, global macro and private equity. Due-diligence chief Joe Burns previously worked at Ivy Asset Management and Soros Fund Management. Launched in 2014. InfraHedge Rob Vanderpool 35,000 State Street unit, which launched in 2011, has more than doubled its rvanderpoolestatestreet.com assets since 2015. Allows investors to construct customized portfolios, with no limits on jurisdiction, strategy or manager selection. All assets are held In separate accounts or funds of one. Chief executive Andrew Allright previously worked at Man Group. Kettera Jon Stein 125 Currently offers access to 44 managers of macro, managed-futures, Strategies, jsteineketterastrategies.com long/short equity, FX and other liquid strategies, with relatively low Hydra Investment minimums. Managers charge same or lower fees as they do for individual separate accounts. Kettera maintains independence by charging only a platform fee, while avoiding conflicts of interest that can arise from sharing in managers' revenues, brokerage rebates and other sources of income. Lyxor Asset Dan Rizzuto 16,000 Societe Generale unit developed one of the first platforms for investing Management, daniel.rizzutoelysor.com In hedge funds. Offers access to 35 funds running multiple strategies Lyxor Managed including event-driven, futures trading, global-macro, long/short credit, Account Platform long/short equity and risk arbitrage. Via MyLyxorMAP.com, investors can view performance measures and access risk-management tools Including stress tests and tracking-error analysis. Willis Towers Oliver Jaegemann 750+ Consulting giant launched Asset Management Exchange (AMX) in 2017 Watson, oliverjaegemann@theamx.com to give institutional clients easier access to hedge fund managers. AMX Initially offered to clients in the U.K, with plans to roll out In the U.S. in 2019. Marketing pitch emphasizes reduced complexity and economies of scale that make It both easier and cheaper to Invest In hedge funds. EFTA00285857 April 10,2019 ( Hedge Fund 6 ALERT Some operators also advertise relatively low minimum- Platforms _Rem Page 4 investment requirements. Investors can access managers on emerged as "infrastructure plays," offering investors easy iCapital's platform for as little as $100,000, for example. access to hedge funds through a managed-account format, And most platform operators tout reduced costs for inves- Picard said. tors, though their fee structures vary widely. Some take a cut of Compared to traditional multi-manager vehicles such as the fees investors pay to the underlying managers, while others funds of funds, managed account platforms give investors charge a platform fee. Some do both. more control when it comes to strategy and manager selection. Kettera's marketing pitch emphasizes the fact that its Hydra An investment executive at a university endowment said they platform only charges a flat platform fee. "We do not derive offer the "ability to hunt with a rifle rather than a shotgun — revenue from brokerage rebates, administration fee-sharing, that is, gain exposure to specific opportunities rather than a interest income or sharing in managers' performance fees: general blank check." Stein said. "Some of our competitors have what we view as con- And in most cases, client capital is invested through separate flicting revenue models:' accounts or "funds of one: rather than commingled vehicles. Even as some platform operators have notched impressive That's why platform operators often highlight transparency, growth in recent years, one major company retreated from the flexibility and control in their marketing efforts. field. Aon Hewitt Investment had been developing a program "The control and transparency afforded to investors provide called Vision Hedge Fund Platform to give investors access to the ultimate protection against Madoff-like risk: said Hedge- new and emerging managers. But Aon suddenly scrapped the Mark chief executive Andrew Lapkln. "In addition, when inves- effort late last year. tors form and control the investment vehicle itself, managers Now, two former Aon executives who were spearheading that have no ability to suspend, gate or otherwise impede redemp- initiative are in the early stages of building a new online invest- tions:' ment system called 4Alts Platform (see article on Page 4). 4. The 4th Annual II401 Family co_ Private CREDIT RISK July 2.2•24, 2019 `-'..TRANSFER SYMPOSIUM'. 1.. .. Office el 4Wealth Gurneys Newport Resort . .April 25, 2019 [New York, Ntl Cl L. 4 • 111IIE tl l Management Forum & Marina, Newport. RI 200+ CREDIT RISK INVESTORS. 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If you are Interested In attending. sconsalrg, speaking or MBA% at this event. please cell212532969S a small Infollopaigroup.mx Principal Financial Analyst Senior Associate Director. Federal Housing Federal Housing REGISTER To recut% Ash us online et vnweepaIgicuo.net or Finance Agency Finance Agency email to et merkebrei$00,..."P-nti Lead Sponsors: sec. tip! )'Arch 41kim.r..t.., SaskelAmerkee Verrill trete at' ® Fannie Mae Freddie Mac Guy CARPENTER www.imn.org/crt - For sponsorship opportunities, contact Chris Keeping at +1 212-901-0533 or ckeepingetimn.org EFTA00285858 April 10, 2019 Hedge Fund 8 ALERT Petviashvili founded a firm called NewsAlpha that uses Capital Flowing to Al Startup machine-learning techniques to perform risk-factor and news- A startup equity manager that employs artificial intelligence sentiment analysis in the stock market. He left in 2018. Earlier, is attracting large amounts of capital. Petviashvili founded technology firm Jaanix. ❖ FORA Capital recently landed an unidentified limited part- ner that brought the San Francisco firm's total commitments to $300 million. The operation already had reported to the SEC Tiger...Frew Page i in March that its lone fund, Fora Capital Partners, was running shuttered his own hedge fund in 2000 and converted Tiger to $116 million of gross assets for 13 investors. a family office focused on backing hedge fund startups. Before Sources said the inflows reflect strong early returns for the financial crisis, when hedge funds had no problem charg- FORA, which chief investment officer Stanislav "Stas" Shalu- ing a 2% management fee, $25 million of day-one capital was nov and portfolio manager Posit "Joe" Petviashvili launched in enough to get a firm off the ground. That's no longer the case, the fourth quarter of 2018. The commitments also demonstrate now that the average management fee is closer to 1.5% and that certain investors are willing to devote substantial capital startup costs have risen sharply — especially for compliance to artificial-intelligence funds, despite deep skepticism in some and technology. circles about whether the strategy can deliver consistent profits. Meanwhile, other seed-capital investors including Black- Little is known about the equity-focused strategy of FORA, stone, Goldman Sachs and Paloma Partners have long shown which presumably would turn over positions frequently based a willingness to commit $100 million or more. Still others, on expectations that it would handle billions of dollars of including Stable Asset Management, routinely invest $50 mil- trades annually. Also unclear is how FORA is defining artificial lion or more. Against that backdrop, Tiger's standard offer no intelligence, given a description in Shalunov's Linkedln profile longer looked so appealing. A spokesman for Tiger Manage- of an "Al fund that uses machine learning and mathematics" ment declined to comment. While artificial intelligence and machine learning often are Robertson, who is 86, has backed about 50 hedge fund used interchangeably, many view artificial intelligence as guid- launches over the years. While many of those firms subse- ing broad decision-making processes and machine learning as quently bought out Tiger's interest or shut down, the 20 or so suitable for narrower tasks. remaining funds run a combined $33 billion to $34 billion — Only a few managers bill themselves as pure artificial-intel- with Tiger Global accounting for about two-thirds of the total. ligence investors. Sentient Investment, which was among those Separate from its seed-investment program, Tiger launched operations, liquidated in the second half of 2018 amid poor a fund in 2011 that deployed acceleration capital to six manag- performance. ers it had previously seeded. That vehicle, Tiger Acceleration Others employ artificial intelligence as part of a broader Fund, raised $450 million from outside investors — mostly cli- mix of quantitative strategies. They include the high-flying ents of Morgan Stanley. The fund, which has since unwound, Voloridge Investment, which was running $3.9 billion of gross invested about $75 million per deal. assets at yearend 2018. Yarn Square, led by Victor Ho, is the new home for an invest- The Eurekahedge Al Hedge Fund Index, which tracks just 13 ment team that previously worked at Sutton Square Capital. Sut- funds, is showing an annualized return of 9.6% since 2011, ver- ton Square founder Ken Brody told investors last August that he sus a 6.7% rise for the the Eurekahedge Hedge Fund Index. The was shutting down the firm for health reasons. Some of Sutton Al index's only down year was last year, when it declined 5.3%. Square's investors were expected to follow Ho and his team to FORM chief operating officer is Jeffrey Bowers, who previ- Yarn Square. Sutton Square was running $206 million, on a gross ously worked at hedge fund managers Coastland Capital and basis, as of Aug. 1, 2018, and the word was that Yarra Square had Passport Capital. But neither Shalunov nor Petviashvili appear about $75 million of commitments as of the fourth quarter. to have investment-management experience, and instead have Before Sutton Square, Ho worked at Conatus Capital and spent their careers mainly as technology entrepreneurs. Ock-Ziff Capital. Yarn Square's investment staff also includes In addition to FORA, Shalunov runs an artificial-intelli- managing directors Arthuros Mangdolls, Jonathan Pines and gence company called Clostra that he founded in 2016. He also Will Simonton. Like many Tiger seeds, the Yarra Square team created a widely used way to transfer data on the internet, co- has relocated to 101 Park Avenue in Manhattan, the home of founded messaging-application business Open Garden, served Tiger Management. as chief executive of Prlonlc Labs and worked at BitTorrent. Stony Point is led by chief investment officer Richard Walters, formerly an analyst at JAT Capital. The New York firm invests in technology and consumer stocks. Walters is joined by former It is a violation of U.S. copyright low to reproduce ony port of JAT colleagues Cameron Williams, who oversees research, and this publication, or forward it electronically, for use by people operations chief Matthew Zweig. Both left JAT in 2015, the year who aren't covered by your Hodge Fund Alert license. For details it closed. about licenses, contact JoAnn Tassie at 201-234-3980 or Tiger's seed investments are directed by chief investment isassierghspnews.corn. officer Gil Caffray and president Alex Robertson, Julian Robert- son's son. ❖ EFTA00285859 April 10, 2019 9 Hedge Fund near macro shops including Brevan Howard Asset Management and Field ... From Page 1 Element Capital booked hefty profits in May because they had reduced leverage or some combination of those factors. been short Italian debt. Field Street Global Investments was holding a sizable long Field Street's professional staff has shrunk from 60 in the position in Italian debt when fresh concerns about the coun- first quarter of 2018 to less than 40 today. Among the latest try's political stability sent bond values plummeting in May departures: client-relations manager Jesse Silver, who has since 2018. The fund, which employed leverage of about nine times joined Mariner Investment; portfolio manager Kevin Breen, equity capital, lost 15% in the first three weeks of the month, now working at Citadel; and portfolio manager Jayraj Chokshl, then fell even more precipitously — for a one-month loss of now at Brevan Howard. Fixed-income strategist Benjamin Mar- 50%, Bloomberg reported. tens, rate-product trader Maximilian Niddam and research head At the same time, a number of other prominent global- Boris Senderovlch also have left in recent months. •:• CALENDAR Main Events Dales Event Location Organizer Information May 6 Sohn Investment Conference New York Sohn Conference www.sohnconferenCe.M6 May 7.10 SALT 2019 Las Vegas SkyBridge Capital www.sattconference.com Nov. 4.5 Gaining the Edge-Hedge Fund Conference New York Agecroft Partners www.apgainingtheedge.com Events in US Dates Event Location Organizer Information April 15-17 Ascendant Compliance Solutions Strategies Spring 2019 Miami CSS/Ascendant compliancesolutionstrategies.corn April 16 Active Passive Investor Summit New York 13D Monitor www.13dmonitor.com April 16 Independent Sponsors & Capital Provi