Creating Reinsurance Firms and Banks - New Permanent Capital Vehicles for Hedge Funds and Fund of Funds

Joe Taussig

• Exclusive Webinar for Hedge Fund Founders and Partners only
• Why Lock-Ups and Closed End Funds don't work
• Creating a reinsurer or bank can provide significant amounts of permanent capital without a proportionate increase in risk
• Proven Models: Learn from the successes of Buffett and Einhorn
• Expert Speaker: Joe Taussig's expertise includes the generation of billions of dollars of permanent capital for hedge fund and FoHF managers

Why Warren Buffett gave up his very successful hedge fund
Despite that success, Buffett quit cold turkey - to go into reinsurance and banking (many years later, regulators forced him to give up control of one or the other and he sold the bank). Armed with permanent capital from the reinsurance and banking businesses, a modest amount of very low cost leverage whose availability was independent of asset values, and market multiples on performance, Buffett became even more successful than he ever was in the hedge fund business (his investors did pretty well too).

Why Lock-Ups and Closed End Funds don't work
Modern efforts to secure permanent capital using lock ups or closed end funds have not been very successful. Resistance to lock ups is fierce and closed end funds generally end up selling at a discount to NAV and today, managers usually have to commit to repurchasing shares if the discount exceeds a certain amount (begging the question of whether it really is permanent capital) in order to complete the initial offering.

Learn from Success:
Drawing on Buffet’s blueprint 35 years earlier, David Einhorn and a number of investors in Greenlight Capital funded Greenlight Capital Re with $212 million in 2004. Einhorn manages all of the reinsurer’s investable assets. In May of 2007, Lehman Brothers and UBS took Greenlight Capital Re public (symbol – GLRE). Assets currently exceed $1 billion and much like Buffett, Einhorn benefits from managing the permanent capital provided by the combination of equity capital and premium generated reserves.

Despite a drop in the insurance indices of roughly 25% since its IPO, GLRE trades roughly 146,000 shares per day at a premium to book value (and very close to its IPO price of $19). Investors in GLRE have done better than if they had invested in the Greenlight Capital funds over the same period of time and also benefit from daily liquidity. Relative to their returns from investing in the Greenlight funds, UK and U.S. taxable investors in GLRE also benefit from taper relief in the UK and the elimination of annual K-1s and lower capital gains rates in the U.S.

Limited to founders (or partners owning more than 15%) of hedge fund or FoHF management companies
Participation in the Webinar on June 5th at 10 am New York time is limited to founders (or partners owning more than 15%) of hedge fund or FoHF management companies who would like to learn more about creating a reinsurer or bank in order to generate significant amounts of permanent capital and provide superior returns (without a proportionate increase in risk) for their investors. Provided that a founder or 15% partner is present, additional colleagues and employees from the hedge fund or FoHF management company may also participate.

Date of webinar: 12. Jun. 2008 at 10:00:00 (EST) (16:00 CET)

Biography of Author: Joe Taussig of First International Capital participated in the creation of Greenlight Capital Re and will conduct the Webinar. Over the years, he has partnered with a number of other hedge fund and FoHF managers to create reinsurers and banks, each of which allocates its investable assets to its sponsoring hedge fund or FoHF manager. Four or five of these reinsurers and banks are expected to offer their shares to the public in the next 12 months, generating billions of dollars in permanent capital for their sponsoring hedge fund and FoHF managers and superior returns (without a proportionate increase in risk) for the investors.

Matthias Knab, Director of Opalesque Ltd, will moderate this webinar. Matthias Knab is an internationally recognized expert on hedge funds and alternatives and has frequently served as chairman of hedge fund conferences in New York, Tokyo, Shanghai, Hong Kong, Miami, Bahamas, Stockholm, Dubai etc. In addition, he has presented or moderated at hedge fund events in Sydney, Cape Town, Madrid, and Bombay, and lectured at numerous universities on the subjects of hedge funds and the state of the global alternative asset management industry.

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