Alternative Market Briefing

Philip Duff: How to build hedge fund firms that last, Hedge funds` risk-management practices get more scrutiny, Former Senator Breaux: No flying beneath radar for hedge funds, industry needs to do better job of getting out ahead of important regulatory matters

Wednesday, February 14, 2007

Opalesque Exclusive: Philip Duff: How to build hedge fund firms that last Matthias Knab reports “live” from Key Biscayne: As founder of FrontPoint Partners (in 2006 Morgan Stanley reportedly paid about $400 million for FrontPoint, then with $5.5 billion in assets), former Chief Operating Officer at Tiger Management, former Chief Financial Officer of Morgan Stanley and former President & Chief Executive Officer of Van Kampen Investments, Philip Duff has proven to be a successful hedge fund executive and entrepreneur. In a keynote speech at the MFA Network conference in Key Biscayne, he shared some of his insights and learnings in building hedge fund management firms

Duff mentioned that “all the talk” about lower hedge fund fees did not materialize – with such a high demand that we continue to see, the fees “cannot” go down. Within this positive setting, Duff identified drivers and challenges of the current asset management industry:

Asset liability gaps of pensions and other institutions
Rising correlations – “a by-product of globalisation”
Lower returns across the board

As a consequence, investors find that their approach to investing and diversifying needs to change. The question for managers/entrepreneurs is “how to benefit from the growth that stems from this need for diversification”. Corporations would be looking for ways to offload their pension investments and liabilities in a financially and reputationally feasible solution. ......................

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