Sat, May 28, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers April 2013

47N Series - Barbarians at the gate

Fraser McKenzie

This article was authored by Fraser McKenzie, Manager Partner, 47 Degrees North Capital Management is a specialist alternative investment firm, and a pioneer in early-stage hedge fund investing. It was selected as one of three successful candidates out of 97 applicants to manage the emerging hedge fund managers program at CalPERS.

47N is a leading proponent of corporate governance in the hedge fund industry; so the objective of this series of articles is to discuss and inform on current corporate governance issues.

A barbaric trend seems to be emerging amongst hedge funds; more and more are using investor-level gates. This construct allows managers to restrict investor redemptions (most often to 25% per redemption period) based upon their individual investment amount - as opposed to the more common fund-level gate which restricts investor redemptions based on the overall amount of redemptions a fund is experiencing. The fact that Moody's calls investor-level gates a "credit positive" event for hedge fund asset-liability management should set alarm bells ringing amongst investors. Any advantage created by lawyers for a hedge fund is likely to have a hairy side.

It's possible that this recent trend toward investor-level gates is part of the five-year hangover from the 2008 financial crisis when managers were trying to find ways of avoiding the massive redemptions that blighted the hedge fund industry.  A more cynical observer might suppose that investor-level gates act as a preserver of management fees......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Performance - Hedge fund ETFs take a battering, Have long-short credit funds delivered?[more]

    Hedge fund ETFs take a battering From ETFStrategy.co.uk: It was a blow for the hedge fund world when Hillary Clinton’s son-in-law Marc Mezvinsky announced he would be closing his Greek-focused fund after it plummeted in value by 90%, just two years after it launched. For passive investor

  2. Americas - Australian banks sending U.S. hedge funds broke, Ryan Puerto Rico ‘rescue’ bill could be windfall for hedge funds[more]

    Australian banks sending U.S. hedge funds broke From SMH.com.au: US hedge funds are not having the best of years. Profits are hard to find, they're underperforming and the punters are losing patience, withdrawing US$15 billion ($20.8 billion) in the March quarter. They're expected to wit

  3. Investing - Billionaire Wilbur Ross likes the look of Chinese bad loans, Hedge funds are still relevant in a diversified portfolio: 4 fundamental criteria for superior manager selection[more]

    Billionaire Wilbur Ross likes the look of Chinese bad loans From Bloomberg.com: U.S. billionaire Wilbur Ross said he’s considering investing in nonperforming loans in China, as Moody’s Investors Service said that the nation has the tools to prevent a financial crisis in the near term. I’

  4. Investing - Blackstone gives pricey Canadian energy and property thumbs down, One of the most concentrated hedge fund bets is getting crushed, Facebook is hedge funds' new tech darling,[more]

    Blackstone gives pricey Canadian energy and property thumbs down From Bloomberg.com: Canada’s energy assets are uneconomic and real-estate markets overvalued, making them less attractive for investment than in the U.S. and elsewhere, according to Tony James, president of Blackstone Group

  5. Study - Only 30% of institutional hedge fund portfolios beat the benchmark[more]

    Bailey McCann, Opalesque New York: A new study from CEM Benchmarking, an independent provider of cost and performance analysis for pension funds, shows that only 30 percent of institutional investors hedge fund portfolios beat the benchmark after fees. The study provides in depth analysis of real