See GRAPEVINE on Back Page

Auditor ‘Arms Race’ Spawns New TechnologyKPMG’s purchase of Rothstein Kass last year fueled an “arms race” among the top

accounting firms that has them collectively investing tens of millions of dollars in new technology for their hedge fund clients.

PricewaterhouseCoopers is accelerating efforts to roll out a tax-analysis program dubbed Track Insights that it introduced early last year — part of a multi-year ini-tiative for which the firm has allocated $100 million. KPMG is spending substantial sums to upgrade its PartnerTrack software, which allows fund operators to gauge the tax implications of their trades on an ongoing basis. And partners in Deloitte’s asset-management practice are tuning up their technology offering to increase the speed and improve the accuracy of the fund audits they perform. The details of Ernst & Young’s strategy are unclear.

The surge of investment among the “Big Four” promises to give fund managers See TECHNOLOGY on Page 8

Boone Pickens’ Fund Shop Making Fresh PitchBoone Pickens’ hedge fund firm, BP Capital, is on the marketing trail again for

the first time in years.Pickens’ lieutenants at the Dallas firm — including recently hired business strat-

egist Jason Wallace and portfolio managers Brian Bradshaw and David Meaney — have implemented a slew of policy changes aimed at making the flagship BP Capital Energy Fund 2 more appealing to institutional investors. The energy-futures vehi-cle, which manages $243 million including parallel separate accounts, gained 9.75% last year — despite a 15.2% drop in July as oil prices began to tank.

At the same time, the firm is making a fresh pitch for two newer vehicles: the $6 million BP Capital Inflation Alpha fund, which trades rate-sensitive products, and the $10 million BP Capital Energy Horizons fund, an energy-stock vehicle that launched last year.

Founded in 1997, BP runs about $500 million overall, mostly for wealthySee BOONE on Page 6

Sanborn Kilcollin Team Retiring, Shutting FirmEquity manager Sanborn Kilcollin Partners has wound down following a 13-year

run.The Chicago firm, which had been running about $225 million, pulled the plug

after co-founder Rick Kilcollin signaled his intention to retire — prompting co-founder Robert Sanborn to do the same. A third partner, Josh Mangoubi, is now considering his next move, including possibly launching a new fund.

Sanborn Kilcollin returned the bulk of investor capital in September, with the balance held in escrow pending a final audit. Limited partners apparently received the rest of their money in recent weeks.

At the end of September, the firm’s Elkhorn Fund showed a year-to-date return of 6.9%, compared to a 2% gain for the HFRI Equity Hedge (Total) Index. The fund took a value approach to investing mainly in U.S. stocks.

Sanborn and Mangoubi served as portfolio managers, while Kilcollin oversawSee SANBORN on Page 6

2 Visium Pitching Lockup Vehicle

2 Low Fees Undermine Pension Search

2 Bond Volatility Pounds Raven Rock

4 AlphaParity Nabs Perella Executive

4 Ex-Nomura Pros Regrouping

5 Paloma Backs Ex-Kensico Analyst

6 Staffing Drain Continues at Arden

10 Russian Investors Top Losers List

10 Energy Pros Eye Transmission Rights

4 HEDGE FUND PERFORMANCE

11 LATEST LAUNCHES

Daniel Moses has hired away Fintan Part-ners’ chief operating officer for his newly forming Pacific Creek Partners. Chris Montclare started at San Francisco-based Pacific Creek this month, around the time of the event-driven firm’s scheduled launch. Montclare had been employed since 2005 at Fintan, a debt-focused fund-of-funds shop that was purchased by Cantor Fitzgerald last year. Before that, he worked at Technology Crossover Ventures and Ernst & Young. Moses left Partner Fund Management in 2012 to set up Pacific Creek.

New York fund operator Incline Global picked up two high-ranking executives late last year. Sat Joshi now is in charge of the firm’s credit-product holdings, bringing its investment staff to six. He most recently handled a mix of equity

THE GRAPEVINE

JANUARY 21, 2015

Visium Pitching Lockup VehicleHealthcare specialist Visium Asset Management is offering

investors a new way to gain exposure to the sector.The $6.5 billion firm, whose flagship hedge fund invests in

healthcare stocks, has begun marketing a private equity-like vehicle that will offer financing to biotechnology companies, manufacturers of medical devices and other healthcare busi-nesses by purchasing royalty streams and possibly other assets. The closed-end fund, dubbed Visium Healthcare Partners, will have a 10-year term.

Visium has tapped placement agent Fortress Group, with the goal of raising $500 million of equity for the vehicle. It is target-ing unleveraged returns of 18-20% annually.

The multi-strategy firm is led by Jacob Gottlieb, who holds a medical degree and oversees the flagship Visium Balanced Fund. That vehicle takes long and short positions in healthcare companies based on fundamental and event-driven analysis.

In 2013, Gottlieb recruited a team from private equity shop Paul Capital to lead a new healthcare-finance unit, with a focus on royalty-related investments. The team is led by Ken Macleod, who will serve as portfolio manager of the Visium Healthcare Partners fund along with Avinash Amin, a physician who joined the firm last year from private equity manager Siguler Guff.

In addition to royalty streams, the new fund may invest in debt and revenue interests supported by commercial-stage healthcare products, intellectual property and other assets, according to an investor note Visium circulated this month.

Gottlieb founded Visium in 2005. The $3.7 billion flagship fund gained 8% last year and has delivered an annualized return of 15%.

Low Fees Undermine Pension SearchHedge fund managers are balking at an investor’s request

that they slash their fees.Milwaukee County Employees’ request for proposals sought

a single-manager equity shop to run $60 million in exchange for a 0.5% management fee and no performance fee. Sources said the $1.8 billion pension system had received scant interest by its Jan. 8 deadline for responses.

Nat Kellogg of investment consultant Marquette Associates is handling the process for Milwaukee County Employees, which maintains a 10.5% allocation for hedge funds and funds of funds. He wouldn’t comment on whether a winner would emerge.

While many investors have been pushing hedge fund opera-tors to cut their fees from the usual 2% of assets and 20% of profits amid declining profits, the belief among outsiders is

that Milwaukee County Employees’ suggested charges were too low for most managers to consider. Another consultant raised the possibility that the strategy could backfire, resulting in a search where “only asset-hungry or poor-performing manag-ers respond.”

Separately, Milwaukee County Employees put out a request for proposals from fund-of-funds operators interested in running an equity-focused allocation of $120 million. That assignment comes closer to matching the usual charges for a multi-manager shop, at up to 0.85% of assets and no perfor-mance fee.

Bond Volatility Pounds Raven RockRaven Rock Capital just suffered its first-ever annual loss,

extending a streak of disappointing performance for the firm.The $321 million operation’s Raven Rock Credit Fund fin-

ished 2014 with a minus-7.4% return, dragged down by a late-year decline that included dips of 4.1% in November and 4.9% in December. With the loss, the vehicle now has missed its return target for four straight years.

Raven Rock is blaming its 2014 slide on volatility in the high-yield bond market. The BofA Merrill Lynch U.S. High Yield Index was running a year-to-date gain of 6% at midyear, only to finish up a mere 2.5% as bond prices swung wildly dur-ing the second half — its worst showing since the credit crisis was at its peak in 2008.

In an update sent to investors this month, Raven Rock said it “remained long the high-yield market over the summer, when we should have been more aggressive in taking profits.” The Chapel Hill, N.C., firm also pointed to losses on energy-related exposures, along with hits on positions it maintains in interest-rate products and equities for hedging purposes.

When Raven Rock launched its fund in 2009, the firm told investors it would aim to produce unleveraged annual returns of 10-15%. It initially hit that target, producing an 11% profit for the final three months of that year and rising 18.8% in 2010.

Although it has remained profitable, Raven Rock hasn’t met its performance goal since then — booking gains of 6.5% in 2011, 8.7% in 2012 and 5.8% in 2013.

Still, the firm is sticking with its strategy and its return tar-get. Believing that the vehicle’s existing holdings will regain value amid anticipated volatility in the oil and equity markets and a rise in short-term interest rates, it wrote in this month’s investor letter that “there’s more upside in this portfolio than at any time since we started the fund.”

Raven Rock Credit Fund ended 2014 with $109 million under management, with the rest of the firm’s assets in sepa-rate accounts.

Raven Rock takes directional and relative-value positions in convertible and high-yield bonds. The firm was founded by a team of six former Argent Funds staffers who all remain on board, with Nate Brown, Guy Caplan and Bobby Richardson sharing the title of managing partner. Don Steinbrugge’s Agec-roft Partners handles marketing functions.

January 21, 2015 2Hedge FundALERT

Stumped by a Term of Art?Hedge Fund Alert’s online glossary offers plain-English definitions of industry jargon that’s likely to trip you up. The next time you need help with hedge-fund lingo, click on the “Glossary” link in The Marketplace section of HFAlert.com.

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Growing up: A new environment for Hedge Funds

AlphaParity Nabs Perella ExecutiveGlobal-macro shop AlphaParity has hired an alumnus of

Perella Weinberg and Tudor Investment to serve as president — part of a broader effort to increase its appeal to institutional investors.

Jeff Silverman is set to join the New York firm later this month. Silverman, currently head of strategic development for Perella’s asset-management unit, will be reunited with fel-low Tudor alumni Steve Gross and Joshua Smith, who together founded AlphaParity.

With a two-year track record and $500 million of assets, AlphaParity’s management believes the firm has the poten-tial to attract substantial amounts of fresh capital from family offices, endowments, foundations and pensions. In addition to recruiting Silverman, the firm is getting ready to launch two vehicles to supplement the flagship AlphaParity All-Weather Fund, which has produced a 12% annualized return since launching in October 2012. The fund takes a systematic approach to investing in stocks, bonds, commodities and cur-rencies globally.

Silverman will play a key role in crafting the new offerings, working closely with chief operating officer Ed McGraw. The first launch, set for April 1, already has won the backing of a seed investor. The vehicle’s strategy is to help protect limited partners from stock-market volatility. The second fund, to launch later in the year, will be a fixed-income play without correlation to the bond market.

Silverman spent nearly five years at Perella, and before that worked as an in-house talent scout at Tudor, with a focus on recruiting portfolio-management teams. Indeed, he recruited Gross and Smith in early 2010. Two years later, they launched AlphaParity with $30 million — with Gross serving as chief investment officer and Smith as head of research.

Alexandra Nadler, who oversees investor relations at Alp-haParity, also used to work at Tudor.

Ex-Nomura Pros RegroupingA new global-macro shop is almost ready to begin trading.Blue Helm Capital of Red Bank, N.J., is led by former Nomura

executive Liran Blum and some of his colleagues from the bank. It is aiming for late in the first quarter or early in the second quarter to launch with some $150 million.

Blue Helm would operate a commingled fund called Blue Helm Global Macro Master Fund and a separate account. Its strat-egy encompasses investments in a mix of products from devel-oped and emerging markets, with a volatility-driven component.

Investors will pay fees of between 1.5% and 2% of assets and 15-20% of profits, depending on the share class.

Blum owns Blue Helm and holds the title of chief investment officer. He worked in Nomura’s New York office from 2009 to mid-2014 as a member of the Tokyo bank’s principal-strategies group, a proprietary-trading unit that invests in a mix of finan-cial products.

Most recently, he led the division’s activities across North

and South America. Earlier, he was in charge of fixed-income and currency desks for the region. Before joining the group, he ran a global-macro portfolio at SAC Capital.

Also on board at Blue Helm are president Guilherme Decca and senior portfolio manager Richard Gaborow, both Nomura alumni. Decca held an executive post focusing on operations for Nomura’s principal-strategies group. He also has worked at Standard Chartered, Lehman Brothers and Dresdner Kleinwort. Gaborow was a portfolio manager at Nomura, following stops at UBS, Credit Agricole, BNP Paribas and Lehman.

Blue Helm’s staff additionally includes operations specialist Gregorios Plakoudas. He worked at QFR Capital until December, and earlier was at Millennium Management.

The planned launch comes after global-macro funds reversed three years of losses to emerge as the top-performing category of hedge funds in 2014, with the HFRI Macro (Total) Index posting a 6.4% gain.

January 21, 2015 4Hedge FundALERT

Hedge Fund Performance Dec. 2014 Return Return (%) (%)BENCHMARK INDICES S&P 500 -0.25 13.69Russell 2000 2.85 4.89MSCI EAFE (Europe, Australia, Far East: net) -3.46 -4.9Barclays Aggregate Bond 0.09 5.97Barclay/Global HedgeSource -0.09 3.262,000+ funds (unweighted) CogentHedge 0.19 3.513,100+ funds (unweighted) Credit Suisse Hedge Fund Index 0.01 4.135,000+ funds (weighted) Eurekahedge Hedge Fund Index 0.12 4.472,500+ funds (unweighted) Greenwich Global Hedge Fund Index 0.09 3.462,000+ funds (unweighted) HedgeFund Intelligence 0.21 4.77,000+ funds (unweighted) HFN Hedge Fund Aggregate Average -0.05 3.964,900+ funds (unweighted) HFRI Fund Weighted Composite 0.08 3.332,000+ funds (weighted) Equity -0.16 2.05 Event-driven 0.23 1.38 Macro 0.75 6.17 Relative value -0.33 4.2 Fund of funds 0.32 3.35 Emerging markets -2.02 -2.26Preqin Hedge Fund Analyst 0.02 3.784,500+ funds (unweighted)

Paloma Backs Ex-Kensico AnalystFormer Kensico Capital executive Boris Ginovker has won

the backing of Donald Sussman’s Paloma Partners.Ginovker, who left Kensico early last year with the aim of

launching his own fund, started trading for the multi-strategy Paloma Fund this month with a commitment of about $200 million. The investment is somewhat unusual for Paloma inso-far as Ginovker is a fundamental stock picker, while most of the other portfolio managers involved with Paloma’s $2.3 bil-lion fund employ quantitative or relative-value strategies.

Other than that, Ginovker’s agreement with the Greenwich, Conn., firm is fairly typical. He is operating from his own firm, Dasoma Capital of New York, running Paloma’s money in a sep-arate account. That allows Paloma to adjust the size of Dasoma’s portfolio, as well as its risk parameters.

Paloma once insisted that its managers initially run money exclusively for Paloma Fund. But in recent years, the firm has given some the green light to market to other investors right away. Ginovker soon plans to launch a hedge fund with the goal of raising an unspecified amount of capital, then will immedi-ately close the vehicle to additional investors for perhaps a year or two.

For Paloma, Ginovker manages an unlevered portfolio of liquid stocks, with an average holding period of two years for long positions and 18 months for shorts — longer than is typi-cal for a long/short equity vehicle. Dasoma’s staff also includes partner Danny Seth, analyst Joel Silverman and chief operating officer Jeff Lazar.

Seth, whose specialty is international stocks, previously worked at R-Squared Capital, Artio Global Investors and San-sar Capital. Lazar most recently held the title of chief financial officer at EverKey Global, a unit of Wells Capital Management, and before that worked at Twin Capital. Silverman joined from Water Street Capital.

Ginovker spent four years at Kensico, a Greenwich fund operator that had about $7.5 billion of gross assets at the start of 2014. Earlier, he worked for a Jefferies-Leucadia National joint venture that invested in high-yield corporate debt.

Other fund operations that have launched with Paloma’s backing in the past couple of years include statistical-arbitrage manager AlphaCrest Capital, volatility trader Xaraf Manage-ment and credit-product investors Reef Road Capital and Rho-dium Capital.

Founded in 1989, Paloma was among the earliest hedge fund seeders. One of its first investments was in D.E. Shaw.

January 21, 2015 5Hedge FundALERT

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Staffing Drain Continues at ArdenArden Asset Management has lost two more employees, con-

tinuing a long period of staff turnover.Louis Rodriguez resigned from his post as head of opera-

tional due diligence at the New York fund-of-funds operator on Jan. 2, with information-technology specialist David Furstein leaving the same day. Rodriguez will serve as a consultant to Arden until yearend.

Rodriguez arrived in 2006, following stints at EIM Manage-ment and Deutsche Bank. He apparently plans to become an emergency medical technician, although one source said he hasn’t ruled out a new job in the hedge fund industry. Manag-ing director Chris Omueti is stepping in as his replacement. Fur-stein, a senior associate, joined in 2010 from Beacon Capital. His plans are unknown. The source said Arden has automated his functions.

The departures don’t appear to be related to this month’s resignations of managing directors Shakil Riaz and Anthony Marzigliano — who arrived together in 2009 from J.P. Morgan and now are set to move to Rothschild Asset Management in April. Riaz, who sat on Arden’s four-person investment com-mittee, will become Rothschild’s global head of alternative investments. Marzigliano, a global-macro and credit research specialist, will continue to serve under Riaz as a managing director.

Arden has seen numerous personnel head for the exits in recent years, but has replaced most of them. A spokesman for the firm characterized its headcount as remaining steady at 56 as of yearend, compared to 62 in 2013.

While the latest moves have raised questions about how the firm’s backers would respond, indications are that they don’t plan to pull their money as long as founder Averil Mortimer and top lieutenants Henry Davis and Ian McDonald remain on board.

That said, word on the street is that Fidelity Investments is second-guessing a 3-year-old relationship under which the Boston mutual fund giant distributes a liquid-alternative prod-uct managed by Arden. That’s apparently because the vehicle, a mutual fund with a hedge fund-like strategy, has underper-formed. Indeed, Fidelity pulled $200 million of client capital from the fund in December — dropping the entity’s assets to $1 billion.

Arden runs $6.1 billion of discretionary assets and $5.6 bil-lion in non-discretionary accounts.

Boone ... From Page 1

individuals and family offices. The new fund-raising push is aimed at broadening the firm’s client base — in part by per-suading institutional investors that it is uniquely positioned to capitalize on opportunities in the oil and gas sectors. While it’s unclear how much fresh capital BP wants to raise for its flag-ship fund, the management team believes it could put another $500 million to work over the next 12-18 months, a source said.

The marketing effort is highlighting a number of inves-

tor protections and other operational improvements that have been put in place in recent months. They include more conservative risk controls to limit drawdowns and enhanced transparency. In addition, the fund has discontinued its pol-icy of locking up investor capital early on, and has dropped a so-called gate provision that permitted the fund to suspend redemptions.

And for the first time, BP is hiring an outside administra-tor to calculate net asset values, process subscriptions and redemptions, and perform other administrative functions. The contract is expected to be effective March 1 — at which point BP will join the vast majority of hedge fund managers that employ third-party administrators.

The original BP Capital Energy Fund launched in 1997 and generated stellar returns, thanks in part to its use of leverage. Through periodic profit distributions, the fund returned inves-tor capital many times over. It suffered heavy losses during the global financial crisis, however, prompting the manager to stop accepting capital for that vehicle and to begin raising money for Fund 2. The current iteration doesn’t employ leverage.

Pickens, 86, a legendary oil investor, serves as chairman of BP Capital, while Bradshaw and Meaney run the firm’s invest-ments. Bradshaw arrived in 2003 from KPMG, while Meaney joined in 2005 after working at Southwest Securities and Ful-crum Global Partners. Both executives have equity in the firm and plan to continue managing the business when Pickens retires.

Energy Fund 2, which launched in February 2009, gained 33.5% that year, lost 15.4% the following year, was flat in 2011, then gained 6.6% in 2012 and 21.5% in 2013. It has beaten the HFRI Macro Commodity Index every year except in 2010, when the index rose 10.6%.

The Inflation Alpha Fund, which launched in March 2013, gained 17.4% that year and 9.9% last year. The Energy Horizons Fund was flat last year, even as the sectors it targets dropped 30-40%.

BP Capital is part of a family of asset-management busi-nesses controlled by Pickens that also includes mutual fund shop BP Capital Fund Advisors and a private equity unit called BP Energy Partners.

Sanborn ... From Page 1

the operations side of the business.Prior to their 2001 launch, Sanborn managed Harris Associ-

ates’ $9 billion Oakmark 1 mutual fund, while Kilcollin was president of the Chicago Mercantile Exchange. Before that, Kilcollin was chief executive of Wells Fargo Nikko Investment Advisors.

Mangoubi joined Sanborn Kilcollin in 2002 after running his own real estate investment firm, MISR Properties. He was promoted to partner in 2009.

Ken Sorenson, who had been head of investor relations at Sanborn Kilcollin, joined Calamos Investments in October. He previously worked at Hovde Capital.

January 21, 2015 6Hedge FundALERT

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Technology ... From Page 1

new tools to improve their tax efficiency and prepare state-ments for clients — including the notoriously complicated Schedule K-1. But the heightened competition also is putting increasing pressure on smaller accounting firms, most of which lack the resources to build faster, more sophisticated systems.

“It’s a competitive space,” said George Michaels, founder of tax-technology firm G2 FinTech of New York. “The tax stuff has to offer something the others don’t. And higher frequency is where the arms race is coming in right now.”

The widening gap between the biggest hedge fund auditors and their smaller rivals is prompting talk of a new wave of con-solidation. “There is chatter out there about what does this do to market players,” said an executive at a Big Four firm. “I have friends in those [smaller] firms that say, ‘We are not going to spend the money on that kind of stuff.’ ”

When it closed on its purchase of Rothstein Kass on July 1, 2014, KPMG advanced to third place in Hedge Fund Alert’s auditor ranking, leapfrogging Deloitte and moving within spitting distance of Pricewaterhouse. E&Y leads the field with 2,369 fund clients among SEC-regiastered managers as of the first quarter of 2014, followed by Pricewaterhouse with 2,169, KPMG and Rothestein Kass with 2,062, and Deloitte with 1,266. While competition among the Big Four always has been fierce, the gloves came off after the Rothstein Kass acquisition.

A key focus of the firms’ business-development efforts is

helping managers get K-1 forms into the hands of limited part-ners more quickly. Processing the forms has long been a head-ache for managers, often prompting complaints from investors that they arrive too late. Indeed, many wealthy individuals shun hedge funds out of fear that waiting for the K-1s could force them to request filing extensions from the IRS — which in turn might lead to an audit.

For Deloitte, improving the efficiency of the auditing and tax-preparation process for fund operators is a key priority. And no wonder, considering the firm prepares an average of 8 million K-1s each year.

“What you’re talking about is something our clients have been absolutely demanding, that the process becomes more efficient and the time frame for K-1 issuance be accelerated,” said Ted Dougherty, who heads Deloitte’s U.S. hedge fund practice.

At the same time, the big accounting firms are developing technology that would allow managers to continually assess the tax implications of their investments. Two of the most common tax-related challenges, for example, are so-called wash sales and straddles. In a wash sale, an asset whose price has fallen is sold in order to book a loss for tax purposes, then quickly replaced. A straddle involves taking money-losing positions specifically designed to offset gains on other investments. In both cases, the IRS enforces complex sets of rules restricting such transactions. One goal of the accounting technology now under development is to give managers better tools for pursu-ing tax-efficient strategies while remaining strictly compliant.

KPMG’s “scenario-planning” software currently allows cli-ents to analyze the tax implications of their portfolios on a quarterly basis. But within a year or so, some clients will be able to perform that kind of analysis on a monthly or even daily basis. It’s just a matter of time, the accounting firms say, before technology is in place that would give managers a real-time view of their tax efficiency.

Another goal of the big firms is to fully integrate tax-related data from their fund clients with corresponding data from prime brokers and administrators. That could cut down on the amount of time auditors spend aggregating data for tax filings.

“The next big challenge for us is the incoming data flows,” said Deloitte’s Dougherty. “That requires a fair amount of peo-ple effort to get data formatted the right way into the system. If we reach that, we will find the Holy Grail.”

What effect the Big Four “arms race” has on smaller firms remains to be seen. Arthur Bell, founder of Arthur Bell & Associ-ates, said his firm offers technology that easily competes with larger rivals. The firm, which ranks 12th on Hedge Fund Alert’s league table, counts two of the biggest hedge fund operators among its clients.

“The big guys try to leverage their size, and I don’t blame them,” Bell said. But “the boutique shops, which mostly offer expertise, will be around. I have never heard someone say, ‘I’m going to go with E&Y because they have a bigger bat.’ ”

Still, Bell is taking steps to protect his turf. The Hunt Valley, Md., firm soon plans to open offices in New York and Green-wich, Conn. And this month, it hired business-development specialist Kim Waldman from law firm Maples & Calder.

January 21, 2015 8Hedge FundALERT

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Feb. 19-20 Collateral Management Forum New York American Leaders www.americanleaders.com

Feb. 22-23 Distressed Investing Summit Palm Beach, Fla. M&A Advisor www.maadvisor.com

Feb. 23 Catalyst Cap Intro: L/S Equity-Quant Alt. Investing New York Catalyst Financial www.catalystforum.com

Feb. 23 Institutional Investor Life Settlement Conference New York LISA www.lisa.org

Feb. 24-25 UCITS & AIFMD for US Managers 2015 New York IBC www.iiribcfinance.com

March 3-4 IRLS 2015 New York SIFMA www.sifma.org

Events Outside US Dates Event Location Sponsor Information Jan. 27-28 MiFID II London Infoline www.infoline.org

Jan. 28-29 Mexican Private Equity Finance Forum Mexico City Euromoney www.euromoneyseminars.com

Jan. 29-30 Canadian Power Finance Conference Toronto Euromoney Seminars www.euromoneyseminars.com

Feb. 3-5 Alphascope Geneva ICBI www.alphascope-event.com

Feb. 9-10 European Family Office Winter Symposium London Opal Financial www.opalgroup.net

Feb. 10-11 InterTrade 2015 Bahrain Pinnacle Comm. www.pinnaclecommunications.com

Feb. 11 Amsterdam Investor Forum Amsterdam ABN AMRO Clearing www.abnamroclearing.com

Feb. 12-13 Cayman Alternative Investment Summit Cayman Islands CAIS Ltd. www.caymansummit.com

Feb. 25-26 Capital Requirements for Investment Firms London Infoline www.infoline.org

March 4 Family Office Investment Summit: UK London Incisive Media www.familyofficesummit.com

March 9 Market-based Finance London Chatham House www.chathamhouse.org

March 11-12 Offshore Investment Conference Panama 2015 Panama City, Panama Offshore Investment www.offshoreinvestment.com

March 17-18 New Generation Operational Risk London CFP www.cfp-events.com

March 24-25 World Exchange Congress London Terrapinn www.terrapinn.com

March 26-27 Trading Show London London Terrapinn www.terrapinn.com

March 30-31 Middle East Investment Summit 2015 Dubai Terrapinn www.terrapinn.com

April 13-16 Fund Forum Asia 2015 Hong Kong ICBI www.fundforumasia.com

To view the complete conference calendar, visit The Marketplace section of HFAlert.com

Russian Investors Top Losers ListA closely watched gauge of fund performance confirms

that betting on Russia was the worst hedge fund trade of 2014.The three biggest money losers among some 500 funds

tracked by HSBC’s alternative-investment group were Russia-focused vehicles run by Firebird Management of New York, Kaltchuga Capital of Luxembourg and Prosperity Capital of London. At the bottom was Prosperity’s Russian Prosperity Fund, which lost 44%, followed by Kaltchuga Fund-Russian Equities, down 42%, and Firebird New Russian Fund, down 34.7%.

The losses reflect a decline in Russia’s economy tied to a sharp drop in oil prices and U.S. and European trade sanctions resulting from the conflict in Ukraine and Russia’s annexation of Crimea. The MSCI Russia Index fell 44.3% last year, while the ruble lost about 40% of its value versus the dollar.

Then again, volatility is nothing new for investors in Rus-sia. Indeed, all three of the funds on the HSBC list have suf-fered bigger drawdowns in the past — including a 90.3% swoon for the Prosperity fund following the 1998 financial crisis in Russia. That event also led to the collapse of Long Term Capital Management, perhaps the most famous hedge fund blow-up of all time.

More recently, the Kaltchuga fund fell 81.8% during a 13-month rout that lasted until January 2009. Firebird, mean-

while, has taken steps to lower its exposure to Russia and diversify its investments — including the launch of its first U.S. stock fund last year.

Still, Firebird co-founder Harvey Sawikin said he isn’t giv-ing up on Russia. “I’ve never seen the market more disliked,” he said. “There are reasons for that, sure. [But] I would say that in emerging markets, my experience in over 20 years is that there’s only one sure way to make money, which is to buy low and sell high.”

Over the long run, all three Russia-focused managers have delivered respectable returns, with annualized gains of 12% for Kaltchuga, 15.3% for Prosperity and 16.2% for Firebird.

Other names on HSBC’s list of poor performers include Paulson Co., which has three funds among the bottom 20. The $2.5 billion Paulson Advantage Plus was down 24.3%, the $2.9 billion Paulson Recovery Fund fell 19.3%, and the $1.2 billion Paulson Advantage lost 18.6%. A year earlier, Paulson Recovery made HSBC’s list of top-performing hedge funds.

As for the 2014 winners, the biggest gainer in the HSBC database is the $283 million ISAM Systematic Fund, which rose 62.4%. That vehicle, managed by trend-following spe-cialist ISAM Systematic of London, was among the worst per-formers of 2013.

Energy Pros Eye Transmission RightsTwo energy traders have set up their own fund-manage-

ment firm.Abram Klein and Dong Shen, both formerly of Edison Mis-

sion Marketing & Trading, plan to launch a fund from their Appian Way Energy Partners by the end of the first quarter. It appears the vehicle, Appian Way Energy Opportunity Fund, would trade mostly in “basis contracts,” which give the right to receive and distribute commodities such as electricity at specified times.

The fund also may buy “financial transmission rights,” which power suppliers use to hedge against variations in electricity prices at the time of delivery. As part of the push, Appian Way has applied to trade on a so-called regional transmission organization operated by PJM Interconnection.

The Cambridge, Mass., firm also has registered with the National Futures Association while claiming exemption from regulation by the Commodity Futures Trading Commission, suggesting that it would trade only a minimal amount of futures.

Klein and Shen were on board until last year at Edison Mis-sion Marketing, an energy-trading unit of power producer Edison Mission Energy. Klein served as head of trading, with Shen as a senior trader of financial transmission rights.

Both arrived in 2001. Klein previously was a principal at consulting firm Putnam, Hayes & Bartlett. Shen came from Lucent Technologies, and before that was at Putnam Hayes.

Edison Mission Energy filed for bankruptcy in 2012. Par-ent Edison International sold the operation to NRG Energy last April.

January 21, 2015 10Hedge FundALERT

Reference HFA10 for 10% discount!

Andrew Rabinowitz, Partner and COO, MARATHON ASSET MANAGEMENT

Gareth Henry, Managing Director, FORTRESS INVESTMENT GROUP

John Rohal, Executive Chairman, North America, MAN GROUP

Ed Rzeszowski, Managing Director, BLACKROCK

Ethan Powell, Chief Product Strategist, HIGHLAND CAPITAL MANAGEMENT

Amanda Tepper, Chief Executive Officer, CHESTNUT ADVISORY GROUP

Lester Coyle, Chief Investment Officer, AVM/III ASSOCIATES

Richard Howard, Global Strategist, HAYMAN CAPITAL MANAGEMENT

January 21, 2015 11Hedge FundALERT

BATTLEFIN DISCOVERY DAY&

BIG DATA COMBINE 2

JANUARY 27TH, 2015

The Palms HotelMiami Beach, FL

LATEST LAUNCHESLATEST LAUNCHES

Fund Portfolio managers, Management company Strategy Service providers Launch

Equity at Launch

(Mil.)

D.E. Shaw Valence Fund Domicile: U.S. & Cayman Islands

D.E. Shaw New York 212-478-0000

Statistical arbitrage Jan. $900

Visium Healthcare Partners Domicile: U.S. & Cayman Islands See Page 2

Avinash Amin and Ken Macleaod Visium Asset Management, New York 212-474-8800

Healthcare royalties Placement agent: Fortress Group 2015 <$500

(Undetermined)

Moni Sternbach Man GLG, London 44- 207- 016- 7000

Equity: long/short 1Q-15

To view all past Latest Launches entries, subscribers can click on the Databases tab at HFAlert.com

TO SUBSCRIBE HEDGE FUND ALERT www.HFAlert.com

... From Page 1

THE GRAPEVINE

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January 21, 2015 12Hedge FundALERT

and credit-product investments at Ziff Brothers Investments from 2009 to 2013, following stops at Apollo Global and Lazard. Meanwhile, Tom Seier signed on as head trader at Incline, with duties including global-macro analysis and risk-control monitoring. He last worked at Signpost Capital, and has spent time at Artio Global, TPG-Axon Capital and Ziff Brothers. Appaloosa Management alumnus Jeff Lignelli launched Incline in 2012 with a focus on equities. The firm’s lone fund was running $223 million at the start of last year.

MidOcean Credit Partners has added a trader. Edward Galanek arrived at the New York debt shop last week, follow-ing seven months as a consultant to Northlight Credit Management. Previ-ously, he spent three years as a portfolio manager and head trader at Pinebank Asset Management. He also has worked as a portfolio manager at Tricadia Capi-tal. MidOcean Credit is led by Ted Virtue in New York. The affiliate of private

equity firm MidOcean Partners was running $3 billion of regulatory assets as of February 2014.

Quantitative shop Berenberg Asset Management has hired a professional to oversee relations with the consultants that guide its institutional backers’ investment decisions. David Moylan joined the operation’s New York office in November, following stints at EnTrust Capital and Pimco. Berenberg Asset Management is a unit of Hamburg, Ger-many, bank Joh. Berenberg, Gossler & Co. It had $25.5 million under manage-ment as of Oct. 31.

Cary Goldstein has joined the Los Ange-les headquarters of debt-fund operator Empyrean Capital as head of technol-ogy and security. Goldstein previously worked in New York as a business-development specialist at ConceptOne, which offers risk- and regulatory-reporting technology to alternative-investment firms. Empyrean runs $4.5 billion of regulatory assets.

Hedge funds are stumbling out of the block in 2015, with U.S.-based vehicles

posting an average loss of 0.5% for the first two weeks of the year, according to a Jan. 20 report from Morgan Stanley’s prime-brokerage department. That’s down from a gain of almost 0.2% in December. Long/short equity funds started 2015 with a 0.7% decline, while event-driven funds dropped 0.6%. But hedge funds still helped their investors preserve capital, as the S&P 500 Index was down 1.9% as of Jan. 16.

A member of the proprietary-trading team that RBC Capital opted against spinning off last year has moved to Guggenheim Partners. Dan Hertz joined Guggenheim’s New York office this month as a member of its Guggenheim Life and Annuity unit. He had been employed at RBC since 2011 as a high-yield debt analyst, and before that spent time at Goldman Sachs and BMO Capital. Facing pressure to comply with the Dodd-Frank Act’s Volcker Rule, RBC had been planning to spin off its prop-trading unit into a new hedge fund company with as much as $1 billion of backing from the bank. But it called off the effort after the Federal Reserve balked.