April 2008
Hedge funds in France
A new esprit de corps
special report
FRANCE CONTENTS/INTRODUCTION
Contents
4
OVERVIEW
A robust platform for future growth
10
FUNDS OF HEDGE FUNDS
Funds of funds start to gather momentum
20
SINGLE MANAGER HEDGE FUNDS
New faces spice up single strategy space
This report was researched and
written by Philip Moore
28
HEDGE FUND START-UPS
Entrepreneurs battle on despite downturn
Published by
HedgeFund Intelligence, Nestor House,
Playhouse Yard, London EC4V 5EX, UK
Email info@hedgefundintelligence.com
Telephone +44 (0) 20 7779 7330
Fax +44 (0) 20 7779 7331
Website www.hedgefundintelligence.com
32
INVESTORS IN HEDGE FUNDS
Building the investor base
36
SPONSOR PROFILES
Special reports editor Barry Cohen
bcohen@hedgefundintelligence.com
Editorial director Neil Wilson
nwilson@hedgefundintelligence.com
Editor, EuroHedge Nick Evans
nevans@hedgefundintelligence.com
Introduction
Editor, InvestHedge Niki Natarajan
niki@investhedge.com
It is two years since we published our first special report on hedge
Production editor Kim Lankshear
funds in France – analysing the growth and development of
Group publisher John Willis
jwillis@hedgefundintelligence.com
Chief operating officer Peter Highland
phighland@hedgefundintelligence.com
Customer service
UK Gary Charalambides
gary@hedgefundintelligence.com
US Lisa Saljanin
lsaljanin@hedgefundintelligence.com
Database and directory sales
UK Ian Sanderson
isanderson@hedgefundintelligence.com
US Gee Spiller
gspiller@hedgefundintelligence.com
Subscription sales
UK Jamie Austin
jaustin@hedgefundintelligence.com
+ 44 (0) 20 7779 8041
US Susanne Kerekes/Zach Ktsanes
skerekes@hedgefundintelligence.com
zktsanes@hedgefundintelligence.com
+ 1 212 224 3570
For reprints please contact Jamie Austin,
jaustin@hedgefundintelligence.com
Disclaimer: This publication is for information purposes only. It is
not investment advice and any mention of a fund is in no way an
offer to sell or a solicitation to buy the fund. Any information in this
publication should not be the basis for an investment decision.
HedgefundIntelligence does not guarantee and takes no
responsibility for the accuracy of the information or the statistics
contained in this document. Subscribers should not circulate this
publication to members of the public, as sales of the products
mentioned may not be eligible or suitable for general sale in some
countries. Copyright in this document is owned by HedgeFund
Intelligence Limited and any unauthorised copying, distribution,
selling or lending of this document is prohibited. All rights reserved.
2 SPECIAL REPORT APRIL 2008
Europe’s second largest hedge fund centre after the UK.
Much has changed since then and there is even more evidence
that the building blocks are in place for the rapid further development of this increasingly broad and robustly-based marketplace.
So we felt the time was ripe for a second report – covering the increasingly flexible and constructive regulatory framework, the
growth of the leading fund of funds and single-manager hedge
fund groups, the development of the local and international investor base and the environment for new start-ups.
The sub-title of this report – A New Esprit de Corps – encapsulates the spirit of common purpose that now seems to unite
regulators, fund managers and service providers in their desire to
push the industry forward.
For all participants in the industry – from the financial giants
that have traditionally dominated the French hedge fund landscape to the increasing number of smaller and more
entrepreneurial firms – this is a time of great opportunity and
challenge.
We hope that this report will contribute to an understanding of
the key trends that are driving the industry forward in France –
and of the key characteristics that differentiate it from its counterparts elsewhere in Europe and the rest of the world.
Nick Evans
Editor, EuroHedge
©EuroHedge
AlternativeInvestments
Get a fresh view of
alternative investments
from our experts
Over the last decade Lyxor has set the pace in alternative investments by offering unique hedge fund investment opportunities
combining risk management, transparency, liquidity and performance. Lyxor’s renown and expertise are based on its hedge fund
platform, a world leader in terms of number of funds and strategies covered. Lyxor’s experts offer an extensive selection of
innovative alternative investments, from funds of funds harnessing the Lyxor platform’s advantages to arbitrage funds aiming to
generate positive performance regardless of market conditions. Lyxor AM currently ranks in the top 10 alternative funds managers in the world, with assets under management in excess of EUR 26.5 billion.
Meet our experts in alternative investments: +33.1.42.13.76.75 / contact@lyxor.com
© Photo : Tristan Paviot
Alain Dubois Chairman
FRANCE OVERVIEW
A robust platform
for future growth
Hedge funds are thriving in France, due not least to a positive approach by the
regulatory authorities. The Autorité des Marchés Financiers, created by the merger
of several regulators, is praised both publicly and privately by French managers
Ian Rogers, Simmons & Simmons,
Paris
It is unusual in any area of the financial services in-
that the French investor base was insufficiently fa-
dustry – and almost unheard of in the hedge fund
miliar with alternative investments to support a
world – to find market participants speaking with
new risk arbitrage-based hedge fund and, second,
virtually one voice about anything, let alone doing
because they were uncertain about the regulatory
so positively about a market regulator. But it
environment prevailing at the time.
seems that hedge fund managers in France have
Seven years later – by which time the team had
nothing but praise, both publicly and in private, for
opened operations in New York and Singapore and
the Autorité des Marchés Financiers (AMF).
was managing a highly successful merger arbi-
Established in 2003, following the merger of the
trage fund worth $1 billion – the environment for a
Commission des Opérations de Bourse (COB),
new kid on France’s hedge fund block had
the Conseil des Marchés Financiers (CMF) and
changed beyond recognition.
the Conseil de Discipline de la Gestion Financière
Robbe, Lenfant and two other colleagues left
(CDGF), the AMF is responsible, inter alia, for the
CIC in April 2007 and, by the end of the year, they
regulation, authorisation and supervision of collec-
had launched the Laffitte Risk Arbitrage Fund.
tive investment products.
“We were very impressed by how ready the AMF
Ian Rogers, a solicitor in the hedge funds prac-
was to promote alternative funds,” recalls Lenfant,
tice at Simmons & Simmons in Paris, says that,
Laffitte Capital Management’s managing partner.
following the 2003 merger, the mentality of the
“In 2000, it would have taken us between six
more private sector-oriented CMF probably pre-
months and a year to get the approval we would
vailed over the more austere approach of its
have needed to set up a new hedge fund. In 2007,
former state-owned partners. And it shows.
the whole process took no more than about two
Scores of Paris-based hedge fund managers testify to how supportive the AMF has been in the
months. We have an extremely positive relationship with the AMF.”
development of the industry. But the recollections
4 SPECIAL REPORT APRIL 2008
of Eric Robbe and David Lenfant are especially
Mixed praise
telling, because they put the evolution of that sup-
True, Paris-based hedge fund managers are not
port into its historical context.
quite so fulsome in their praise for other regula-
Back in 2000, 10 years after they set up the bas-
tors in the French financial services industry. “The
ket trading desk at CIC’s equity derivatives
main difficulty we have in France is that we still
subsidiary, they started to think about using their
don’t have a single regulator responsible for over-
experience to create their own hedge fund.
seeing the whole market,” says Xavier Lépine,
However, they decided against branching out on
chairman of the management board at Groupe
their own for two reasons. First, because they felt
UFG, the multi-specialist asset management sub©HedgeFund Intelligence
OVERVIEW FRANCE
sidiary of Crédit Mutuel Nord Europe. “While the
site. Especially in France, hedge funds have less
AMF regulates the fund managers, institutional
leverage, less of a long bias and fewer liquidity
clients may be regulated either by the AMF, or by
problems because they have learned from previ-
the regulator y bodies responsible for insurance
ous mistakes and established longer lock-up
companies or the retirement system. From a port-
periods.”
folio management point of view, that means we
have to create different types of product for dif-
Evolution of regulation
ferent clients.”
True enough. But it is also very clear that regula-
That particular bottleneck does not, however, ap-
tor y support was playing a vital role in
pear to have stymied the expansion of the French
underpinning the growth of the French hedge fund
hedge fund universe. Of course, a highly volatile
industry long before the sub-prime crisis began to
global capital market has helped the industry to
tighten its ghastly global grip.
flourish, as long as they are not leveraged up to the
eyeballs – which French hedge funds are not.
The most important steps in the evolution of that
regulator y support were taken in 2003 and 2004,
“Clearly, the market environment today – with
when regulation came into force governing funds
more volatility, more dispersion, more uncertainty
of hedge funds (OPCVM de fonds alternatifs) and a
and more inefficiencies – is positive for hedge
range of other alternative funds under the ARIA
funds, which is why we have seen more inflows
label. This refers to funds à regles d’investissement
over the last year or so,” says Fabrice Cuchet,
allégées (funds subject to more flexible investment
global head of alternative asset management at
rules), and covers unleveraged single-manager
Dexia Asset Management in Paris, which has just
funds (Aria SEL – or simples), funds using leverage
over €9.5 billion of alternative assets under man-
of up to 400% (Aria EL – or those using ef fet de
agement. “In France, if you look back to 2007,
levier) and funds of funds (also known as Aria 3).
according to the AMF the hedge fund business
The regulations of 2004 also cover fonds con-
was one of the rare areas that posted growth in as-
tractuels – in general, bilaterally negotiated funds
sets under management, even though inflows were
with free investment rules and a high minimum
flat in the second half of the year.”
investment.
Others agree that the generally robust perform-
It was the publication of these regulations in
ance of French hedge funds in 2007 has been very
November 2004 that has been the main impetus
helpful in underpinning their credentials as pre-
behind the recent growth of the French hedge
ser vers of value, rather than sharp-shooting and
fund industr y. Figures on the market’s total size
highly speculative destroyers of value.
tend to var y, partly because of definitional com-
“One of the effects of the crisis has been to
plications. As Alain Dubois, chairman of the
prove the robustness of alternative investments
board at L yxor, says, the worlds of conventional
once again,” says Jean-François Valicon, chief ex-
and alternative asset management are increasingly
ecutive officer of Barep Asset Management, the
converging.
diversified alternatives asset manager wholly
“Products like 130/30 funds and some of the
owned by Société Générale Asset Management
cash-enhanced vehicles are what I would call soft
(SGAM). “With a well-managed, diversified port-
hedge funds,” says Dubois. “But we are also seeing
folio, last year investors could achieve typical
convergence from a regulatory standpoint. For ex-
returns of 8% to 10% with pretty low volatility levels
ample, stocks can now be shorted in UCITS funds,
of 4% or 5%. To me, that represents a very good re-
so they can be constructed in such a way that they
sult in a year when we lived through such a severe
are very close to hedge funds.”
liquidity crisis.”
Arié Assayag, head of hedge funds at Société
To Valicon, it also represents a big step forward
Générale Asset Management (SGAM), agrees that
compared with other crisis years, which is a meas-
the distinction between genuine hedge funds and
ure of how much the industr y has matured. “In
other products can sometimes appear blurred in
1998, banks suffered a lot but recovered ver y
France. “It is true that a lot of managers include
quickly,” he says. “But for hedge funds, 1998 was a
exchange-traded funds (ETFs) and money market-
nightmare. Their performance was horrible and as
type funds in their hedge fund operations, which
many as 20% disappeared. In 2007, it was the oppo-
can be very confusing,” he says.
©HedgeFund Intelligence
Alain Dubois, chairman of the
board, Lyxor
Arié Assayag, head of hedge funds,
Société Générale Asset
Management
SPECIAL REPORT APRIL 2008 5
FRANCE OVERVIEW
The challenges facing compilers of statistical
institutional investors. That remains the main im-
data on the French hedge fund market are con-
pediment to the growth of the hedge fund industry
firmed by Sophie van Straelen, managing director
in France.”
of the research and advisor y firm, Asterias. She
In practice, a number of hedge fund managers
points out, for example, that data collected by the
have ignored these non-solicitation rules by – for
AMF on the size of the industry includes dedicated
example – issuing back-dated documentation certi-
mandates, whereas the figures published by
fying that funds have been sold in response to
Asterias refer only to funds open to investment.
unsolicited demand from clients.
Inevitably, the results are very different.
Sophie van Straelen, managing
director, Asterias
Nevertheless, Rogers and others believe that, as
“The AMF data says that assets in funds of funds
and when the regulations on local marketing are
are up 30% in 2007, which is strictly speaking cor-
lifted, the French hedge fund industry has the po-
rect,” she says. “But our figures on funds open to
tential to see turbo-charged growth.
investment show the market to be flat.”
Specifically, Asterias puts the size of the entire
Optimistic for the future
French hedge fund industr y (including offshore
Those who believe accelerated liberalisation is
and French regulated funds) at a little over €90 bil-
only a matter of time have no shortage of grounds
lion in September 2007. That is very slightly down
for optimism. After all, French hedge funds have
on the total in September 2006, but the lion’s share
for the most part performed resiliently during the
of the decline is accounted for by enhanced cash
recent global downturn and, with leverage levels
“We were very impressed at how ready the AMF
was to promote alternative funds. In 2000, it
would have taken us between six months and a
year to get the approval we needed to set up a
new hedge fund. In 2007, the whole process took
no more than about two months”
David Lenfant, managing partner, Laffitte Capital
Management
generally low or non-existent in the local hedge
fund community, there have (to date) been no
French equivalents of the recent upheavals at
Peloton, Focus Capital and elsewhere.
Additionally, leaving aside one or two sideswipes
from President Sarkozy motivated principally by
political expediency, there has been little in the
way of enflamed public opposition to the concept of
hedge funds – with managers generally not portrayed by the popular French press, as in some
single-manager funds (down by more than quar-
6 SPECIAL REPORT APRIL 2008
other European countries, as the source of all evil.
ter) and enhanced cash funds of funds. While
Nor have the regulatory authorities sought to in-
growth in ‘pure’ cash funds of funds was flat, pure
sulate even modestly well-heeled retail investors
single-manager funds were up by more than 32%.
from the hedge fund industr y, as many of their
That is not bad for a countr y in which, ostensi-
European counterparts have. The minimum legal
bly, there has been some political hostility towards
subscription to hedge funds in France of just
the hedge fund industr y which has been as unin-
€10,000 is low by European standards.
formed as it has been vocal, with some newspaper
Sympathetic regulation in isolation would not, of
headlines in 2007 suggesting that President
course, be enough to sustain the continued
Sarkozy was preparing to “declare war” on hedge
strengthening of Paris’s standing as a centre for
funds. Nor is it bad for a regime in which, strictly
hedge fund management. But, as local managers
speaking, the law continues to impose fairly dra-
point out, the city has plenty of other attractions.
conian limitations on what hedge fund managers
And the proof is that a number of managers with a
can and cannot do.
very international orientation are still happy to re-
“Although the AMF has moved in the right di-
tain Paris as the hub of their global operations.
rection with steps such as the authorisation of
Take, as an example, a player like Société
funds of funds, the main issue in France today is
Générale’s subsidiary Lyxor, which manages some
the marketing of hedge funds,” says Rogers at
$40 billion in alternative assets.
Simmons & Simmons. “The fact is that true hedge
“In truth, we’re not very French,” says Dubois.
funds, or offshore vehicles with no legal or regula-
“Although we’ve been in the hedge fund business
tory constraints on the contents of their portfolios,
since we were set up in 1998, we have many more
still can’t be marketed in France – even to qualified
end-investors in Switzerland than we do in France,
©HedgeFund Intelligence
FRANCE OVERVIEW
and our main institutional clients are in the UK,
with the scientific community, which have helped
the Netherlands and Japan.”
us to attract top-quality people whom we can teach
to become excellent quants who know how to be-
Close to its roots
come efficient alpha generators,” says Aguilar.
L yxor has, however, remained true to its Paris
“Second, we are very firm believers in the develop-
roots, for a number of reasons. Aside from keeping
ment of a structure and a culture where people
the firm close to the engine room of Société
exchange ideas and cross-fertilise rather than
Générale’s derivatives department, the efficiency
compete with one another. To do that, we need a
of Eurostar means that central London is a little
lot of stability and a low staff turnover level, which
over two hours away – which, as Dubois remarks,
we have achieved by paying people in line with in-
makes Paris a pleasant suburb of London. He also
dustry standards and promoting values which they
says that it is generally easier to retain good peo-
share. I’m not sure that we would be able to main-
ple in Paris, while a number of French-based
tain that culture if we hired people from Wall
managers add that the higher educational system
Street or the City.”
in France is in many ways more conducive to
Whether or not France will be able to leverage
preparing young graduates for a quantitative ca-
attractions such as its much friendlier regulatory
reer in finance than it is anywhere else.
environment, low staff turnover and quality of
That has made France an attractive recruiting
ground for a firm like Capital Fund Management
(CFM), which was established by Jean-Pierre
Aguilar in 1991 and has built a reputation for encouraging a highly scientific-based approach to its
well-regarded research.
That emphasis on research is perhaps best illustrated in the CV of its chairman and chief scientist,
Jean-Philippe Bouchaud – one of 28 PhDs now at
quant experts to encourage some of the top
“In France, if you look back to 2007, according to
the AMF the hedge fund business was one of the
rare areas that posted growth in assets under
management, even though inflows were flat in the
second half of the year”
Fabrice Cuchet, global head of alternative asset
management, Dexia Asset Management
the firm. Among his various achievements,
Bouchaud won the IBM Young Scientist prize in
1990, teaches statistical mechanics and finance at
London-based French hedge fund managers to re-
various grandes écoles and is the co-author (along-
turn to Paris is open to debate. The main
side CFM’s managing director of research, Marc
determinant of where talented hedge fund man-
Potters) of the Theory of Financial Risk and
agers choose to locate, say many Paris-based
Derivatives Pricing, published in December 2003
observers, has more to do with tax considerations
by Cambridge University Press.
and personal preference than with regulation or
market trends.
A scientific approach
But is not just the capacity of France’s grandes
Two-way street
écoles and other educational establishments to pro-
And, while a number of French managers have
duce a deep reser voir of mathematical geniuses
chosen to base themselves in London rather than
that has been so attractive to firms like CFM. Just
Paris, the traffic has not been all one-way. Albion
as important has been the tendency of French-edu-
Asset Management, for example, looks like a small
cated, Paris-based scientists-turned-financiers to
enclave of the UK hedge fund industr y in the
flit from one position to the next much less fre-
swankiest Paris arondissement. Albion was estab-
quently than their counterparts in financial centres
lished in 2005 by Sean Hurst, who in 1998 had
such as London and New York.
established the closed-end fund arbitrage desk at
When EuroHedge inter viewed Aguilar in 2006,
BNP Paribas, and co-founder Hannah Rossiter,
he explained that he made a point of never hiring
who qualified as a solicitor at Clifford Chance be-
from Wall Street or the City of London and, in
fore moving to ABN Amro.
2008, he sees no reason to abandon that policy, for
two reasons.
“First of all, we have ver y close relationships
8 SPECIAL REPORT APRIL 2008
Albion’s
flagship
product,
launched
in
September 2005, is the Albion Fund, an offshore
100% market-neutral, closed-end fund arbitrage
©HedgeFund Intelligence
OVERVIEW FRANCE
fund. But, given that closed-end funds are some-
when they come we are on their list of people to
thing of a closed book to the French financial
visit,” she says.
community, Paris seems an odd location for the
She adds: “When we did the budgeting, we re-
fund. Even stranger, at first glance, is Albion’s
alised Paris would be considerably cheaper than
choice of premises in Rue de la Paix, more or less
London.” Managers’ salaries, she says, are consider-
midway between Cartier’s flagship store in Paris
ably lower in Paris than in London, although many of
and Place Vendôme, a prestigious address even by
those savings are eroded by much higher social se-
the standards of French hedge funds.
curity costs.
Rossiter says that Albion is based in Paris largely
External compliance costs, however, are also
for personal reasons, and that the firm was one of
much lower in France than in the UK: while audit
the first to benefit from the new regulatory regime
fees for modestly-sized asset management compa-
designed to attract managers of offshore funds to
nies can reach £75,000 or £80,000 per year in
Paris. She says that there have been obvious pros
London, Albion has been able to secure the equiva-
and cons associated with being based there.
lent ser vice in France for €5,000. “With the
“We are slightly more removed from what’s
exception of social security costs I would say that it
going in the market than we would be if we were in
is easier to manage your overheads in Paris than in
London, but there are a sufficient number of hedge
London as long as you’re running a fairly small and
funds based here to justify client visits to Paris, and
efficient team,” says Rossiter.
SEARCHING FOR NEW HORIZONS
Both at the single-manager and the fund of funds level, French hedge fund managers have been clocking
up their frequent-flyer accounts in recent months.
Early this year, for example, a delegation from the
leading independent French hedge fund group, ADI,
visited China where, in October 2006, it had lodged an
application for a QFII (Qualified Foreign Institutional
Investor) licence. According to Philippe Paquet, ADI’s
executive vice president for business and strategic
development, ADI expects to have its status approved
by this summer, adding its name to a small inner circle
of four French firms that were recognised as QFIIs at
the start of 2007 – BNP Paribas, Société Générale,
Crédit Agricole and Edmond de Rothschild Asset
Management.
For ADI, a QFII licence would reinforce a commitment to emerging markets that has been increasingly
in evidence over the last year or so. In February, it
launched a multi-strategy Asian fund combining
long/short and relative value strategies, which is managed by a team of four, including two Chinese fund
managers and one from India.
“China is a very important market for us,” says Paquet. “It has developed considerably in terms of liquidity and sophistication, and a futures market is due to
open this year. But our team has also established very
good relationships with local players in markets like
mainland China, Hong Kong and Taiwan where we are
seeing improved information flows and have increasingly good market access.”
ADI is one of a number of French hedge fund managers – with HDF and AAAM other prominent examples
– that are planning to open a new office in Asia this
©HedgeFund Intelligence
year, which in ADI’s case will be a research-oriented
operation in Hong Kong.
Another Paris-based fund of hedge funds manager
who has been on the road recently is Julien Coulouarn,
head of alternative investments at Natixis Multimanager. He was in Brazil in March, and he recalls that
on a previous visit he was struck by how actively Brazilian banks are marketing hedge funds via their retail
networks.
A fund of funds manager looking for international
diversification slightly closer to home is ERAAM, which
in September 2007 launched the Europanel Emerging
Europe fund offering exposure to funds focused on
central and eastern Europe, the former Soviet Union
and Turkey.
Cyril Julliard, ERAAM’s president and co-founder,
says that this long/short equity fund has performance
and volatility targets of up to 20% and around 10%, respectively, which are high by French standards. By the
end of 2007, the new fund had attracted inflows of some
€35 million and had returned 5.5%, although much of
that advance was reversed in the early weeks of 2008.
“French investors have tended to favour multi-strategy funds, but we think they will increasingly look to
the opportunities provided by thematic products,
which is one of the reasons we launched the eastern
European fund,” says Julliard. “We also believe that
the future growth in Europe will come from the east
rather than the west. But, with some of the central European markets looking overvalued, a long-only fund
might be seen as too risky – which is why hedge funds
are probably the best way to benefit from the potential of the region.”
Julien Coulouarn, head of
alternative investments, Natixis
Multimanager
SPECIAL REPORT APRIL 2008 9
FRANCE FUNDS OF HEDGE FUNDS
Funds of funds start to
gather momentum
The French hedge fund market, while it has expanded in recent years, is smaller than it
could be, according to the regulator. A new report recommends scrapping one of the
most onerous requirements for funds of hedge funds, which could offer a needed boost
Marc Landeau, chief executive
officer and founder, Olympia Capital
Management
Although funds of hedge funds (FoHFs) – OPCVM
has been welcomed warmly by the hedge fund in-
de fonds alternatifs – have clearly spearheaded the
dustry in Paris, chiefly because it recognises that
expansion of the French hedge fund market in re-
managers are responsible adults who neither de-
cent years, their growth since the passage of the
serve nor need to have highly prescriptive and
regulatory framework in 2003 has not been enough
bureaucratic regulations stuffed down their collec-
to satisfy all market participants.
tive throat.
“Despite [their] sustained growth, the working
The removal of a layer of red tape, widely re-
group found that total assets managed by regulated
garded as wholly unnecessary, will have been
alternative investment vehicles still accounted for a
especially well received by smaller firms. “We have
disappointing 1% or so of the total assets of AMF-
somebody who spends all his time studying fund
authorised funds.” So said the AMF in its landmark
prospectuses through his 13-criteria glasses,” says
report, On the assessment of the French regulatory
Marc Landeau, the well-regarded veteran of the
framework for funds of hedge funds and on possible
French hedge fund market who founded Olympia
areas of improvement, published in September 2007
Capital Management in 1989. “Our size means we
by a working group chaired by Philippe Adhémar, a
can afford to do that. But for smaller companies, it’s
member of the AMF board.
a luxury.”
Although managers say that there has been a con-
Now that Article 411-34 has been consigned to the
spicuous increase in exposure to FoHFs since the
dustbin and replaced with a more digestible limit of
estimates published in the AMF report – in part
four requirements, Olympia’s 13-criteria specialist
driven by deregulation allowing caisses de retraite
will be deployed elsewhere in the firm and man-
(retirement funds) to put 10% of their assets in
agers throughout the FoHF community will heave a
FoHFs – one manager describes overall French in-
collective sigh of relief.
vestors’ allocations as “ridiculously low”.
“The proposals in the Adhémar report are very
intelligent because they transfer more and more
Scrapping criteria
responsibility to the management company, with the
The key recommendation of the Adhémar report is
regulator retaining the right to intervene if neces-
the scrapping of the 13 regulatory criteria that were
sary,” says Landeau. “That is how it should be,
painstakingly drawn up in 2005 governing the eligi-
because this is essentially an entrepreneurial busi-
bility of underlying funds (Article 411-34). In truth,
ness that needs to be regulated, but managed in an
most of those criteria could scarcely be described
entrepreneurial way.”
as onerous or unreasonable and were, in the words
of one Paris manager, “easy enough to live with”.
Nevertheless, the proposal to do away with them
10 SPECIAL REPORT APRIL 2008
Other specialist FoHF managers also welcome
the AMF’s recommendations, but add that they
either expect or would like to see further easing of
©HedgeFund Intelligence
FUNDS OF HEDGE FUNDS FRANCE
regulation. “The regulatory environment is cer-
“We are very positive about the outlook for asset-
tainly moving in the right direction,” says
raising among French institutions in 2008 because it
Christophe Chouard, managing director and head
is clear that FoHFs are viewed as the best way for
of sales at HDF Finance, which was established in
them to access the market for alternative asset man-
1986 by Gilles du Fretay, and is widely regarded as
agement,” says Julliard.
having been a pioneer in the development of FoHFs
Certainly, the inflows reported by the leading
in France. “For example, we are hopeful that the
French FoHF managers in 2007 – as well as in pre-
AMF may accept the concept of redemption gates.”
vious years – suggest that the sector has been
There are other weaknesses in the market that
gathering an impressive head of steam. It also indi-
Chouard hopes will be addressed soon by the
cates that the largest players are increasing their
AMF. “We still believe that the AMF’s reporting
stranglehold in what is already a fairly concen-
standards aren’t transparent enough because all
trated market.
FoHFs are put into the same category, when it is
In terms of pure FoHF management, they don’t
very clear that there are so many different
come any larger than Allianz Alternative Asset
strategies and varying risk/reward profiles in the
Management (AAAM), which was originally estab-
FoHF universe,” he says.
lished as AGF AAM in 1997, but was fully integrated
“For the investors’ sake, we would like to see the
into the global Allianz Group in 2007. Today, accord-
AMF building a segmented regulatory environ-
ing to Karim Valimamode, a director at AAAM, the
ment for FoHFs, just as it did for long-only funds.
company has a total of about €8.5 billion under man-
That would make the performance of FoHFs much
agement, principally in FoHFs. “The top five FoHF
more comparable and therefore mean that rank-
managers represent about 64% of the market, and we
ings make more sense.”
are the largest and one of the fastest growing, having
In a similar vein, Chouard says that he would also
posted cumulative asset growth of 54% between 2000
like to see a clearer distinction made between FoHFs
and 2007, while the industry as a whole grew by
with absolute-return objectives and those that aim to
32%,” says Valimamode.
outperform equity benchmarks – for example, by
2007 was, however, very much a year of two
mixing long-only and long/short equity funds,
halves for AAAM. In the first half of the year alone, it
which three of HDF’s FoHFs do. “Those products
saw inflows of more than €1 billion, but those were
are still put in the same basket as absolute return
eroded sharply in the second half of the year, chiefly
funds, when they are really competing with long-
through redemptions in AAAM’s Multi-Alternative
only funds,” says Chouard.
Fund. With 75% invested in alternative strategies and
Karim Valimamode, director, Allianz
Alternative Asset Management
the balance in money market funds, and with no
Predicting a surge
penalties for redemptions, the €1.2 billion Multi-
Nevertheless, the constructive suggestions made by
Alternative product – which is the third-largest
the AMF are one reason many Paris-based man-
FoHF on the market – has proved to be highly attrac-
agers predict a surge in demand for FoHFs.
tive to private banks.
One manager looking confidently forward to the
Redemptions in this fund saw total net inflows for
expected growth in the market is Cyril Julliard, pres-
2007 reduced to €600 million, according to
ident and joint founder of Europanel Research and
Valimamode, with institutional support for AAAM’s
Alternative Asset Management (ERAAM), which
broad range of funds remaining stable. “Our portfolio
has some €1 billion under management and focuses
of FoHFs is one of the industry’s most diversified in
exclusively on European funds of funds.
terms of risk/reward profiles, with products ranging
Julliard points to the findings of a recent poll, pub-
from those targeting a return on EONIA plus 100bp
lished by the local Gestions Alternatives magazine,
through to our long/short equity FoHF which has a
which found that French institutional investors plan
performance target of 10% to 12%,” he says.
to double their allocation to alternative assets in
Comfortably the largest fund both in France and
2008. Granted, they will be increasing their exposure
in the AAAM range, however, is Phénix Alternative
from a very low base of around 3% of their total as-
fund, which has an eight-year track record and has
sets, which as Julliard says is well below the typical
developed impressive momentum since 2004, when it
allocation made to alternatives by institutions in the
had total assets of €700 million and returned 6.45%,
UK or the US.
which was in line with its target return of between 6%
©HedgeFund Intelligence
Cyril Julliard, president and joint
founder, Europanel Research and
Alternative Asset Management
(ERAAM)
SPECIAL REPORT APRIL 2008 11
FRANCE FUNDS OF HEDGE FUNDS
and 8%, with a maximum target volatility rate of 5%.
By the end of 2005, according to Valimamode,
not least, we eliminated the leverage at the fund of
funds level.”
Phénix’s assets had risen to €1.3 billion (with a re-
Christophe Chouard, managing
director and head of sales, HDF
Finance
turn for the year of 7.75%); in 2006, they
Top of its class
mushroomed to €2.6 billion (7.32%) and, by July
In terms of performance, however, according to a
2007, they had expanded to €3.7 billion (returning
ranking published by Asterias, the star performer
7.74%). By year-end, total assets had eased back to
in 2007 was the Multi-Alternatif Select fund man-
€3.6 billion with a performance for the year of 6.2%.
aged by Edmond de Rothschild Management
Valimamode says that Phénix’s size is demonstra-
(EdRMM), which returned 18.33% last year.
bly an asset rather than a liability. “The size of Phénix
Launched in March 2003, Multi-Alternatif Select
is a competitive advantage because it enables us to
had assets under management of €486 million at the
capture all the dynamic trends in the industry,” he
end of 2007, and has consistently outperformed its
says. “It also allows us to be much more selective be-
objective of delivering a minimum return of 8% with
cause of the strong relationships we have been able to
a volatility limit of less than 10%.
forge with our underlying managers.” In total, says
An opportunistic multi-strategy product with expo-
Valimamode, Phénix has exposure to between 110
sure to a concentrated universe of between 25 and 30
and 120 managers, and its average exposure to each
managers, Multi-Alternatif Select is one of a quartet
is no more than 70bp.
of funds within the EdRMM Multi-Alternatif range
A number of the other independent FoHF players
had a very satisfactory year in 2007. Several of the
which between them had assets under management
of €2.7 billion as of December 2007.
year’s best-performing funds were products man-
The largest of the four funds is the €616 million
aged by Olympia Capital Management, which was
Multi-Alternatif Equilibre Euro, targeting low volatil-
founded by Landeau in 1989, and has some $6 bil-
ity and drawdowns and a return of EONIA plus
lion under management with around 150 external
300bp, while the €594 million Multi Alternatif
managers using market-related and absolute-return
Explorer vehicle is an unusual way of providing in-
strategies.
vestors with a low-volatility route into the mercurial
“I think what continues to differentiate us from
commodities market. Launched in September 2004,
others is the combination of our process with our
Explorer is a fund of long-only commodity funds that
top-down and bottom-up expertise,” says Landeau.
has had an average annual volatility of 11.2%, com-
More specifically, he points to five reasons explain-
pared with 28% for the MSCI metals & mining index.
ing Olympia’s outperformance in 2007.
The last of the quartet, the Multi-Alternatif Equity
“First, we read the sub-prime market correctly,”
product, was launched in December 2006 and has as-
says Landeau. “Second, we brought down the beta in
sets of €19 million and, with a further €1.3 billion in its
our overall portfolio. Third, we reduced our expo-
Multigest long-only funds of funds, EdRMM had €4
sure to event-driven strategies. Fourth, we increased
billion under management in Paris out of a pan-
our exposure to global macro. And last, but certainly
European total of €11 billion.
Among the other specialist, wholly-independent
LARGEST FUNDS OF FUNDS IN FRANCE
FoHF managers, HDF Finance posted net inflows of
AUM 31/12/07
Total $1bn
AUM 01/01/07
Total $bn
Growth
$ billion
% Growth
Crédit Agricole Asset Management Alt. Inv.
26.38
20.26
6.13
30.25%
Lyxor Asset Management
25.90
20.30
5.60
27.59%
Allianz Alternative Asset Management#
12.53
8.89
3.64
40.90%
SG Asset Management
11.49
8.40
3.09
36.79%
HDF’s largest funds are its multi-strategy fund,
5.68
4.80
0.87
18.17%
HDF Multi-Alternatives, and its long/short inter-
HDF Finance
5.60
3.85
1.75
45.45%
national equity fund, HDF Global Opportunities,
UFG Alteram
5.21
2.84
2.37
83.51%
both of which delivered returns in 2007 that were
Crédit Agricole Structured Asset Management*
2.70
2.70
0.00
0.00%
in line with their historical annualised averages.
Rothschild Alternative Investment Division
2.40
1.69
0.71
42.22%
But an especially popular HDF product in 2007,
Loze & Associes
1.50
1.22
0.28
22.95%
ERAAM
1.36
1.18
0.17
14.53%
100.75
76.13
24.61
32.33%
Fund of hedge funds
Olympia Capital Management
Total
*estimate
#
Formerly AGF Alternative Asset Management
12 SPECIAL REPORT APRIL 2008
Source: InvestHedge Billion Dollar Club Survey
about €800 million in 2007. That healthy rise,
twinned with continued inflows in the early weeks of
this year, had increased total assets to close to
€3.8 billion by the end of February 2008.
says Chouard, was its multi-strategy fixed-income
fund, HDF Optimix, which returned just over 5%
last year and offers ver y low correlation both to
©HedgeFund Intelligence
Sometimes, Words are Useless.
Excellence, at a Glance.
HDF Eurovest* leads the way.
#1 - Best Return Over 5 Years
#1 - Best Sharpe Ratio Over 5 Years
320
Source: InvestHedge, November 2007 Issue
300
280
HDF Eurovest
+ 123%
260
240
220
200
180
160
140
120
100
MSCI Europe EUR with
Dividends
+ 12%
80
60
40
01/00
01/01
01/02
01/03
01/04
01/05
01/06
01/07
01/08
Inception of HDF Eurovest: 1 December 1999
HDF, the Excellence in Funds of Hedge Funds
HDF provides superior investment solutions to institutional, corporate and private clients.
It is one of the first established independent asset managers in France and is regulated by
the French financial markets regulator AMF. Since its creation in 1986, HDF’s sole activity has
been the management of alternative and long only multi-manager funds. The Funds of Hedge
Funds managed by HDF are either multi-strategy or single-strategy funds covering all asset
classes and regions. HDF currently manages US$6 billion**, and operates 5 offices, Paris,
Brussels, Geneva, New York and Singapore.
For more information,
please contact Christophe Chouard +33 1 44 17 12 65
or visit www.hdf-finance.com
* S&P AA-rated ** as of 29/02/2008
Past performance is not necessarily indicative of future results.
FRANCE FUNDS OF HEDGE FUNDS
“The proposals in the
Adhémar report are very
intelligent because they
transfer more and more
responsibility to the
management company, with
the regulator retaining the
right to intervene if necessary”
Mark Landeau, chief executive
officer and founder, Olympia
Capital Management
bonds and equities.
order to support the extension of its research capa-
“We have demonstrated very clearly that our
bilities to include a broader range of US hedge
multi-strategy FoHFs have consistently provided di-
funds. Also in the pipeline is a new office in
versification and decorrelation over a long-term
Singapore to strengthen client distribution and
horizon, although not on a weekly basis,” says
manager research in Asia.
Chouard. “But, in the volatile environment of 2007,
Chouard is eager to stress, however, that one of
we said that investors who have an issue with weekly
the lessons learned from the intense volatility of
correlation should switch to a product like Optimix
2008 is that caution needs to remain the watchword
which has no correlation either to equities or to
as far as growth strategies are concerned. “One way
fixed income, which is why investors love the
to grow very quickly is to offer better redemption
Optimix product.”
terms to your clients than those offered by the un-
Chouard says that HDF’s objective is to grow, but
derlying hedge funds,” he says. “But, as some FoHF
never at the expense of returns. He adds that an an-
managers found last summer, the danger is that you
nual growth of up to 30% is in line with this objective,
risk facing massive redemptions when there’s a cri-
and will be achieved through a combination of devel-
sis. That is not a risk that we are prepared to take.”
oping new products and broadening the distribution
of existing FoHFs.
Strong growth in assets under management is
also reported by another FoHF specialist, Géa
The most recent addition to its product suite,
(Gestion Equilibrée Alternative), which was set up
launched at the end of last year, is the HDF
in December 2004 by France’s ADI (which holds
Alternative Long Term Fund, which by the end of
49.99% of the equity) and Lombard Odier Darier
February this year had gathered some €20 million of
Hentsch of Switzerland (with the remaining 50.01%).
assets under management.
“The idea behind the creation of Géa was to com-
“Our view was that there are some attractive re-
bine the very strong client relations that ADI had
turns to be generated for a product with a notice
developed – mainly with French institutions – and
period some way between conventional funds of
the manager selection skills that Lombard Odier
funds and private equity,” recalls Chouard. “Last
had built up since the early 1990s,” explains Nicolas
summer’s crisis was a reminder that you can’t have
Gomart, deputy chief executive of ADI and chair-
good liquidity, high returns and controlled risks at
man of Géa. “In a little over three years, assets
the same time. So, by launching a product which
under management have reached almost €700
sacrifices some liquidity by having a two-year re-
million, meaning that Géa has grown into an
demption period, we believe we will still be able to
autonomous company that has established a
offer annual returns of somewhere between 15% and
successful brand name.”
20% on average.”
Within the HDF Alternative Long Term Fund,
Géa now manages a quartet of musically-named
FoHFs. The most recent of these, launched last year,
says Chouard, HDF will be investing in four princi-
Andante, is a so-called contractuel vehicle in the
pal strategies: distressed or dislocated markets; new
form of a fund of funds of funds (F3). This was cre-
or niche markets; individual distressed corporate sit-
ated for a very specific group of investors with a
uations; and long-term long/short equity. The
requirement to cap volatility at a very low 2% and a
common theme running through these strategies,
performance target of EONIA plus 100bp.
he says, is that in each case the fund manager needs
The other three are described by Gomart as more
time to convert opportunities into returns. “In this
classical hedge funds, with Moderato and Allegro
fund, we won’t be looking at hedge funds that see so
both being multi-strategy products launched in
much new money flowing in that they can tighten
2005. As its name suggests, Moderato is the less ag-
their redemption terms,” he adds. “Instead, the
gressive of the two, aiming to return between 5% and
focus will be on exploring new strategies that need
7% with a volatility of around 3%. Allegro aims at
time for opportunities to be turned into return.”
brisker returns of 8% to 10%, with volatility not exceeding 6%.
Two-pronged strategy
14 SPECIAL REPORT APRIL 2008
In 2007, the beat quickened when Géa added
The other prong to HDF’s strategy for growth in
Presto to its FoHF ensemble. Gomart explains that
2008 is geographical expansion. In the coming
Presto is a long/short equity FoHF designed as a
months, HDF plans to open an office in New York in
substitute for equity exposure with reduced volatil©HedgeFund Intelligence
FUNDS OF HEDGE FUNDS FRANCE
ity. “The official target is to outperform 50% of the
“It’s a bit like the wine market. If you want to get
MSCI World Index in euros but, unofficially, we are
your hands on a few bottles of vintage Chateau
aiming to access two-thirds of the upside movement
Petrus, you need to have the right relationships with
in global equities with exposure to only a third of the
producers.”
downside,” says Gomart. “This is what we have de-
Géa is looking to add more products to its suite,
livered to date. In fact, we have outperformed the
with the aim of increasing its assets under manage-
MSCI stock index by a significant margin. The other
ment to €1 billion, including one with a longer
two funds were also within their performance tar-
lock-up period that is able to respond to longer-term
gets at the end of 2007.”
opportunities (as HDF’s recent addition has), and
As of the start of March 2008, Allegro had assets of
another with fewer liquidity restraints for investors.
about €330 million, with €230 million in Moderato
“For regulatory reasons, there is a big potential in
and approximately €50 million in each of Presto and
the life insurance market for products with redemp-
Andante. Generally, says Gomart, Géa’s FoHFs will
tion periods of fewer than 30 days,” says Gomart.
“It’s a bit like the wine market.
If you want to get your hands
on a few bottles of vintage
Chateau Petrus, you need to
have the right relationships
with producers”
Nicolas Gomart, deputy chief
executive, ADI; chairman, Géa
be invested in between 80 and 90 funds, with between 300 and 400 monitored on an ongoing basis.
Best year ever
But, as he adds, monitoring hedge funds and manag-
Rising local demand for FoHFs has been an espe-
ing relationships with managers is more of an art
cially welcome trend for the broadly diversified,
than a science.
investment management subsidiaries of several lead-
“Maintaining an open and trustful dialogue with
ing French banks. “We had our best year ever in
hedge fund managers is part of the story as it allows
2007,” says Xavier Lépine, chairman of the manage-
you to capitalise on good opportunities,” he says.
ment board at Groupe UFG, the subsidiary of Crédit
Systeia Capital Management
43 - 47 Avenue de la Grande Armée
75116 Paris
Tél. : +33 1 58 44 12 50
Fax : +33 1 58 44 12 69
w w w . s y s t e i a . c o m
©HedgeFund Intelligence
SPECIAL REPORT APRIL 2008 15
FRANCE FUNDS OF HEDGE FUNDS
Mutuel Nord Europe.
Oliver Ramé, head portfolio
manager, UFG Alteram
our flagship FoHFs are extremely diversified.”
In total, Groupe UFG had assets under manage-
Liquidity is also very important. “When we do
ment at the end of 2007 of over €21 billion. Some 42%
due diligence on hedge funds we make absolutely
of that total is categorised as being in alternative as-
certain that they maintain a balance between the
sets, of which real estate investment accounts for
liquidity of their assets and liabilities,” says Ramé.
58%, FoHFs for 39% and private equity for 3%.
“We have seen that funds without redemption
Of those three business lines, FoHFs have been
gates, clearly defined notice periods or low-fre-
comfortably the fastest growing, with assets under
quency redemption schedules are at risk from
management growing by €1.5 billion, or 60% in 2007,
investors rushing for the exit in times of stress.
which made UFG Alteram one of the five largest
And, in all market crises without exception in re-
beneficiaries of inflows into the French fund of
cent years, it has been the illiquid strategies that
funds market.
have been most hurt.”
UFG Alteram’s product range has been con-
Robust demand for FoHFs has been very wel-
structed around a well-diversified stable of absolute
come to those diversified managers, which saw a
return and directional single-strategy and multi-
notable hike in redemptions for their enhanced
strategy funds. Volatility targets range from a very
money market (cash plus) funds in 2007. Société
low 1% in its enhanced money market funds through
Générale Asset Management (SGAM), for example,
to racier target bands of between 3% and 10% in its
had a total of €357.7 billion under management at the
long/short equity fund, benchmarked against the
end of 2007, of which 18% was accounted for by alter-
MSCI World Index, and to between 5% and 12% in
native investments – a category that includes hedge
the Alteram Asia product. In general, however, the
funds, private equity, real estate, index fund manage-
priority at UFG Alteram has been on delivering con-
ment and active structured asset management, of
servative returns.
which dynamic or enhanced money market funds
“It’s important to emphasise that our products
are a component part.
have been designed to fit the needs of our French in-
It was redemptions from those instruments that
stitutional investor base, not those of private banks
eroded the year’s inflows for SGAM as a whole,
or high-net-worth individuals, who tend to look for
which totalled €11.3 billion. In the last quarter of
very high returns through hedge funds,” says Oliver
2007, however, outflows reached €8.2 billion, of
Ramé, UFG Alteram’s head portfolio manager. “Our
which €6.3 billion was accounted for by redemptions
products are well diversified both in terms of strate-
from dynamic money market funds.
gies and the number of underlying funds, ranging
from long/short equity to risk arbitrage and CTAs.
Strongest growth area
Our main strength is that, in very uncertain mar-
Arié Assayag, head of hedge funds at SGAM, says
kets, we have been delivering exactly what we have
that the FoHF business, which SGAM first entered in
promised. Rather than promise returns of 12% or
2000, is now probably the strongest growth area
15% a year we aim to deliver closer to 5% to 8%, or
within its broader hedge fund franchise, which em-
EONIA plus 100bp to 500bp. We don’t claim these
ploys just over 130 professionals in New York,
are the most exciting products, but they do consis-
Tokyo, Hong Kong, London and Singapore, as well
tently offer low volatility and low drawdowns.”
as at its headquarters in Paris. In total, Assayag’s
group has assets under management of approxi-
Conservative style
mately €8.7 billion, of which €5.5 billion is in FoHFs,
UFG Alteram’s conservative management style is
with €1 billion in single strategies, €1.2 billion in
reflected in a number of ways. As Ramé says, diversi-
long-only funds and €1 billion in portable alpha.
fication is key. “We could probably provide juicier
“We have a large product range, but the common
returns if our funds were more concentrated,” he
theme throughout our products is that we are
says. “But our policy is generally to limit the maxi-
always looking to add alpha, which can mean
mum weight of any single manager within any FoHF
sourcing alpha through our FoHF programme,
to a fairly low level of 4% or 5%. Although some of the
separating alpha from beta in our volatility pro-
more specialised products such as the long/short
gramme or creating alpha through product
European equity or the event-driven funds have be-
structuring,” explains Assayag.
tween 25 and 28 managers, which is relatively low,
16 SPECIAL REPORT APRIL 2008
To Assayag, one of SGAM’s principal strengths is
©HedgeFund Intelligence
FRANCE FUNDS OF HEDGE FUNDS
in identifying opportunities in new hedge funds at an
10.3% in 2007 and benefits from all the expertise we
early stage in their development, and in accessing
have built in the FoHF arena, but with the short liq-
top quality funds earlier than others. It was SGAM’s
uidity terms imposed by the French law.”
confidence in its ability to identify rising stars in the
More recent additions to the SGAM repertoire
sector that was behind the launch in 2005 of Starway,
have focused on thematic opportunities. At the start
the incubator that was set up as a Cayman-registered
of January 2007, it launched Optimum Asia, which is
master-feeder fund of funds. “We were an early
managed in Tokyo and invests in Asia-based man-
mover with Starway, which has been extremely
agers, rather than in those trading Asian assets from
successful, with assets now amounting to almost
the US and Europe.
$500 million,” says Assayag.
At the start of 2007, SGAM also launched
At the other extreme of the SGAM portfolio is
Premium Value, which is even more concentrated
Premium, the FoHF that focuses on accessing
than Premium itself, focusing on around 15 deep
the world’s most prestigious funds. “Premium
value managers, and which aims at delivering a
invests in funds that are difficult to access,”
return of 15%. “Premium Value has been very suc-
Assayag explains. “We have built a ver y strong
cessful,” says Assayag. “It has returned about 22%
network enabling us to access these funds
since inception with low volatility of about 4.5%.”
because our portfolio managers are former invest-
Another area where SGAM claims strong com-
ment bankers who are able to benefit from close
mitment and expertise is in volatility trading –
ties and relationships they have developed with
given the group’s experience in this area since 2001
the world’s best hedge fund managers.”
and the depth of its derivatives research over the
years. “We are ready to offer our investors highly
Exposure to 20 managers
sophisticated strategies based on volatility,” says
Premium, says Assayag, has exposure to around 20
Assayag – pointing to the Global Volatility Fund, a
managers – with its current line-up including leading
multi-asset class volatility arbitrage fund launched
players such as Tudor, Moore, Caxton, Brevan
in 2005, and to the more recently launched Short
Howard, Millennium and Highbridge. Premium also
Bias Fund, which is described as “an equity beta-
has a performance objective of Libor plus 800bp with
reducer for investors that have a natural equity
volatility of less than 6%, and leverage of up to 200%.
exposure in their portfolio.”
By January 2008, its total assets under management
had reached $1.74 billion.
ment groups, within the larger Société Générale
With assets of $787 million, SGAM’s Optimum is a
empire, can be challenging. Indeed, it is telling that in
fund of around 30 managers, 50% of which are the
the asset management supplement to its fourth-
same as the managers in Premium. Its performance
quarter results presentation for the group as a
target is Libor plus 700bp, with a maximum volatility
whole, Société Générale adds a note emphasising
of 6% and leverage of no more than 150%. Next in
that its total breakdown of assets under management
terms of size is Equilibrium, a fund of about 50 man-
excludes the €72.6 billion managed by Lyxor at the
agers with $466 million of assets, maximum volatility
end of December 2007.
of 3% and no leverage.
18 SPECIAL REPORT APRIL 2008
Filtering through the various hedge fund manage-
It is easy to see why. Lyxor’s three flagship FoHFs
Those three flagship products, says Assayag, an-
are the Lyxor Diversified Fund (LDF), the Lyxor
swer to a wide range of investor preferences. “If
Global Alternative Fund (LGA) – both of which are
clients need more flexible liquidity terms, Optimum
FoHFs based on Lyxor’s managed account platform
and Equilibrium, which have monthly redemption
of 170 funds – and the multi-strategy Turquoise
periods with 30 days, are more flexible than
Fund, a FoHF which invests in external hedge funds.
Premium, which is quarterly with 45 days,” says
The L yxor managed account platform has been
Assayag. “Similarly, if clients are looking for more
the centrepiece of its hedge fund business since it
diversification and no leverage, we will guide them
was created in 1998, offering access to the broad-
towards Equilibrium.”
est range of alternative investment strategies.
He adds: “Our products can also fit with onshore
“We strongly believe that the managed account
regulation. Typically, we serve our natural French
platform is the best way of providing exposure to
client base with AMF-regulated funds, like SGAM
the world’s best asset managers in a highly trans-
Alternatif, which has returned 10.46% in 2006 and
parent
environment,”
says
Alain
Dubois,
©HedgeFund Intelligence
FUNDS OF HEDGE FUNDS FRANCE
chairman of the board at L yxor. “About two-
turns capable of performing in a number of different
thirds of the managers on the platform are from
markets,” says Fabrice Cuchet, Dexia AM’s global
the US and include clear market leaders such as
head of alternative asset management.
Paulson, which has been on the platform since
In the last 12 to 18 months, Dexia AM’s octet of
2001. Ever ybody and his sister wants to build a
FoHFs has continued to be an important part of its
managed account platform, but I think they
product range, led by the Luxembourg-registered
would find it ver y hard to replicate the quality
World Alternative Alphamax, which was launched in
and the track record that we’ve built up at
2001 and had assets of €2.2 billion at the end of 2007.
L yxor.”
The flagship fund, Dexia World Alphamax, returned
Lyxor’s most recent initiative building on that
9.26% in 2007 with volatility of 2.62% – comfortably
track record has been the launch of 14 indices based
within its return targets of 8% to 10% with a maxi-
on all the strategies in the platform, together with a
mum volatility of 5%.
composite index representing the entire hedge fund
A smaller but fast-growing player in the FoHF
universe. “The managed account platform is the per-
market is Natixis Multimanager, which was formed
fect universe from which to construct indices,” says
in July 2007, following the merger of Ixis Private
Dubois. “We know that there is very strong demand
Capital Management and Natixis Asset Square, and
for indices from funds that want to build passive
had more than €6.3 billion under management at the
allocations, and new regulations now allow
end of 2007. Of that total, about €1 billion is in a
European-coordinated UCITS to invest in hedge
range of multi-strategy FoHFs, with a further €1.2
fund indices.”
billion in cash-plus funds and the balance in long-
The other hedge fund manager in the Société
only products.
Générale group is Barep Asset Management,
According to Julien Coulouarn, head of alterna-
which is 100% owned by SGAM. Barep was estab-
tive investment, the merger that created Natixis
lished in 1990 and has total assets under
Multimanager has brought clear synergies that will
management of a little over €7 billion. This total in-
provide a good launchpad for future growth. “The
cludes structured products and money market and
merger has certainly helped because we had a very
enhanced money market funds, as well as FoHFs
complementary range of funds,” he says. “Bringing
and single-strategy funds that encompass trend-fol-
us together has doubled our analytical capacity to
lowing and arbitrage strategies, emerging markets
look at investment opportunities, so it has increased
and high yield, event-driven and long/short equity
the number as well as the diversity of hedge funds
and global macro management.
that we follow.”
Boosting marketing in Asia
panded to include a wider range of funds in the US,
According to Barep’s CEO, Jean-François Valicon,
Latin America and Asia and, later this year, Natixis
between 60% and 65% of its client base is French, al-
Multimanager plans to add more capacity by in-
though the international share of that base has been
creasing its head count – both on the research and on
rising, reflecting the effort that the group has put
the operational due diligence side.
That universe, says Coulouarn, is now being ex-
into stepping up its marketing in Asia and elsewhere
in Europe.
With the French FoHF market continuing to
show such strong growth, will there be room for
Diversification across a broad range of strategies is
newcomers? Landeau at Olympia has reservations.
pivotal for asset management subsidiaries of other
“Of course, you can sit in your bathtub with a
large financial services groups, such as Dexia Asset
Blackberry and build a FoHF portfolio, but that
Management. Group-wide, Dexia AM had just over
isn’t likely to be very successful with French insti-
€105 billion under management in January 2008, of
tutional clients,” he says. “To do your due diligence
which alternatives and structured products ac-
properly, you need access to the single managers,
counted for about 14.5%, with its hedge fund menu
and unless they’ve known you for a long time or you
split over a range of single-strategy funds and
have a lot of money to invest, they won’t see you.
FoHFs.
That’s not because they’re disagreeable, but be-
“A consistent theme in our strategy has always
cause they have a limited amount of time. So I don’t
been to build a diversified range of funds to ensure
see every Tom, Dick and Harry coming into the
that we can offer the optimum profile of risks and re-
French FoHF business.”
©HedgeFund Intelligence
SPECIAL REPORT APRIL 2008 19
FRANCE SINGLE MANAGER HEDGE FUNDS
New faces spice up
single strategy space
The single manager fund has been lagging behind in France in recent years.
However, a range of small, new, boutique hedge funds may find a way of
shining in a market dominated by institutional operators
It is generally recognised that, while the expansion of
The client base is chiefly French institutional in-
French funds of hedge funds (FoHFs) in recent
vestors, although ADI has also been growing its
years has been very encouraging, the same cannot
assets under management in Spain, Italy and
yet be said of the market for single-manager funds.
Scandinavia.
“One of the reasons single-manager funds have
Although it has been a leader in the local hedge
been less successful than funds of funds is that
fund industry for a decade, ADI’s future looked un-
French institutions, such as insurance funds, are not
certain
permitted to put more than 10% of their assets into
management, which had been growing steadily
alternatives, although in practice most are well
since 1998, suffered a sharp reversal, falling from
below that limit,” explains Nicholas Gomart. “Given
close to €5 billion to around €3.6 billion.
in
2005
when
total
assets
under
that limit, institutions prefer funds of funds because
As Fitch Ratings explains in a recent briefing:
they don’t have the resources to monitor funds or to
“Until 2005, much of the AUM was invested in en-
do the necessary due diligence.”
hanced money market funds and relied on
Gomart is deputy chief executive of ADI
convertible bond arbitrage. In 2004-2005 the fall in
Alternative Investments, which was established in
implied volatility and convertible issues hit perform-
1998 by Erich Bonnet and Christophe Bourret as a
ance hard and led to a sharp decline in assets,
specialist in single-manager products. Since then,
threatening the company’s business model.”
ADI has flourished and grown into one of France’s
ADI responded decisively, setting up subsidiaries
largest managers of single-strategy hedge funds,
in hedge fund incubation (New Alpha) and fund of
with assets under management of €5.3 billion and
funds management (Géa), both of which have
125 employees at the end of 2007. Just over 60% of
grown rapidly since their establishment in 2005. In
ADI is still owned by its founders and staff, with the
its core single-fund management franchise, mean-
French insurance company Matmut holding 33.7%.
while, ADI reinvented its business model, as
Philippe Paquet, the firm’s executive vice president
TOP 10 SINGLE MANAGER HEDGE FUND FIRMS IN FRANCE
Ranking Firm name
and head of business and strategic development,
AUM 1/1/08 $bn
City
Country
explains.
1
Dexia
6.20
Paris
France
“Up to 2005, our strategies and the positioning of
2
Sinopia
4.00
Paris
France
our funds had been highly defensive and based prin-
3
Capital Fund Management
3.10
Paris
France
cipally on volatility and convexity,” he says. “When
4
Boussard & Gavaudan Asset Management
3.00
Paris/London
France/UK
5
Exane Asset Management
2.45
Paris
France
the market environment changed, even though we
6
SRM
1.30
Monaco
France
had been delivering good returns there was a shift
7
Systeia Capital Management
1.02
Paris
France
in investor preference towards more directional
8
Sycomore Asset Manamement
0.95
Paris
France
strategies. So we strengthened our market position
9
SG Asset Management
0.81
Paris
France
in terms of our research capabilities, launched new
10
Barep Asset Management
0.60
Paris
France
strategies and inaugurated a presence in new areas
Source: EuroHedge Database and surveys
20 SPECIAL REPORT APRIL 2008
such as long/short equity and fixed income.
©HedgeFund Intelligence
SINGLE MANAGER HEDGE FUNDS FRANCE
Basically, we moved away from an arbitrage and
taken advantage of heightened volatility and ineffi-
trading culture and towards a more research-driven
ciency in the market,” says Fabrice Cuchet, the
investment culture. We also became much more di-
firm’s global head of alternative asset management.
versified as a group with the establishment of New
“As we launched at the very start of 2007, our
Alpha and Géa.”
Volatility Opportunities Fund was obviously a big
The impact is probably best illustrated in the migration away from short-term exposure in ADI’s
beneficiary of the market environment we saw in
2007.”
overall assets under management. “In 2003, as much
Cuchet believes that Dexia AM’s focus on market-
as 60% of our assets were in short-term products,”
neutral strategies was the key element in its
says Paquet. “That share had fallen to 27% in 2006
approach in 2007 and will continue to underpin its in-
and to 22% in 2007. That is an important part of our
vestment philosophy for the foreseeable future. “If
strategy because, by their nature, short-term assets
you look at our long/short products, ranging from
generate less in terms of management fees.”
European equities to emerging market debt, our ap-
In addition to a solid increase in assets under man-
proach has been consistently market-neutral, which
agement in 2007, ADI posted a rise in income of
has provided more value-added for clients in the last
about 20%, to €60 million, and the recent or imminent
year,” he says.
launch of a number of new funds is expected to
bolster further growth this year.
hedge fund industry are in long/short funds and, as
those funds have an average bias of 50%, in order to
two new credit-oriented products, aimed at capitalis-
perform the industry needs positive equity markets.
ing on opportunities such as those provided by the
In European equities, our average net bias in 2007
volatility of the basis between cash bonds and CDS
was minus 1% and, since last summer, the perform-
referencing the same underlying credit, and the
ance of our European long/short fund has been
dispersion between credit indices and their
close to 10% with volatility of 3%. This was clearly
components.
very attractive for our clients who have been asking
for more diversification and decorrelation.”
financial groups, Dexia AM has a larger share of as-
According to Cuchet, since its launch in 1996,
sets under management in single-strategy funds
Dexia AM has aimed to launch roughly one new
than in FoHFs. Of total assets amounting to €9.542
fund every 12 to 18 months, and he believes that
billion at the end of December 2007, €3.251 billion
policy will be maintained going forward. Over the
were in single-strategy hedge funds, with €2.17 bil-
next year or so, he says, Dexia AM plans to look at
lion in FoHFs. Of the balance, cash-enhanced
the potential of a product based on event-driven
products accounted for €3.68 billion while dedicated
strategies for commodities, a new long/short equity
institutional mandates amounted to €440 million.
fund and to explore opportunities in what he de-
Since its entry into the alternatives market in
scribes as “synthetic portfolios”. He says: “The idea
1996, Dexia AM has staked a consistent claim to
there will be to mix different risk premiums to cre-
being a pioneer in a number of single-manager
ate specific portfolio targets.”
strategies, having launched one of Europe’s first con-
Another area that Cuchet thinks will provide in-
vertible arbitrage funds in 1996 and being among the
creasingly compelling opportunities in the coming
first to extend its product suite into high-yield and
months is the credit market, with pricing disloca-
risk arbitrage strategies in 1999. More recent
tions in the leveraged loans market, in particular,
launches have included the Dexia Long Short
offering considerable potential for managers able to
Emerging Markets fund in 2004, a hedge fund vehi-
optimise the timing of their entry into the market.
cle specialising in leveraged loans, the Dexia Long
“Launching a credit-based fund with a two- to three-
Short US Equity fund in 2005 and the Dexia Global
year horizon and a reasonable lock-up period is
Event Fund in 2006.
something we may look more closely at,” he says.
The highlight of 2006/2007, meanwhile, was the
As Cuchet explains, cash-enhanced funds play a
timely launch of its Volatility Opportunities Fund at
key role in the broader diversity of the Dexia AM al-
the beginning of 2007. “Since last year, most of our
ternative product range, and he insists that,
top-performing funds have been volatility arbitrage
although products variously known as cash-plus or
products and market-neutral equity funds that have
dynamic money market funds have had a rotten
©HedgeFund Intelligence
Jean-Pierre Aguilar, founder and
chief executive officer, Capital
Fund Management
“Forty per cent of the assets managed by the
For example, in the autumn of 2007, ADI launched
Among the subsidiaries of the broadly diversified
“For some reason, this sector
never enjoyed much success
in France and, after about 17
years of existence, had only
attracted about €2 billion in
assets”
SPECIAL REPORT APRIL 2008 21
FRANCE SINGLE MANAGER HEDGE FUNDS
Emmanuel Martin, chief investment
officer, Acropole Asset
Management
press in France in the last 12 months, it is a mistake to
CFM’s clients are domestic, with about 55% ac-
tar all these products with the same brush.
counted for by the US and the remainder made up of
“The French cash-enhanced market has been
UK or Switzerland-based institutions. That client
very diversified in recent years and, if you look back
base has been attracted by consistently strong re-
to their performance since last summer, most of the
turns, generated by trading strategies based on a
problems that have occurred within the sector have
research-intensive quantitative approach, that has
been in cash-enhanced funds based on credit
rightly earned CFM a reputation for being a house
strategies,” says Cuchet. “Within Dexia AM, we
staffed by rocket scientists par excellence.
have many cash-enhanced products – including a
“If we have no research, we have no business,”
market-neutral approach to equities, another based
says Aguilar, a computer science graduate who leads
on volatility and another which is an index
a team of 75 people, more than a third of whom
arbitrage fund.
are PhDs. “It is incredible to see how many oppor-
“These last three funds have performed quite well
tunities are still left on the table. But because the
over the past 12 months and have attracted positive
entry price to the market is now higher than ever, we
net inflows over the last six months. So although the
believe you need more and more proprietary re-
negative press I read about cash-enhanced funds is
search in order to identify those opportunities and to
true for the industry as a whole, those funds that
create value.”
have used their alternatives bucket to capture mar-
Given the intensity of its research effort, there is a
ket inefficiencies without leverage, as ours have, are
certain irony that CFM was a victim of perhaps the
continuing to perform well and are even attracting
biggest blow-up to hit the French hedge fund indus-
new money. It’s certainly not the end of the road for
try in recent years, through its $400 million
cash-enhanced funds, which is what some of the pa-
exposure to a cash management programme run by
pers have been saying.”
Sentinel, a Chicago-based company that filed for
Although it is becoming increasingly well-popu-
Given that it is now sub judice, Aguilar is unable to
French single-manager universe is still dwarfed by
say much about the Sentinel case, although he ap-
the fund of funds market. The single-manager mar-
pears
ket is also one that, for a number of cultural and
considerably more satisfactory than was initially
regulatory reasons, has in many cases looked over-
feared. “From our perspective, although it was very
seas rather than to the local investor base for the
unfortunate, Sentinel is no longer a crisis, but a busi-
bulk of its clientele – in spite of the burgeoning mar-
ness to be managed,” says Aguilar. “Several legal
ket for French FoHFs which is underpinning an
actions are ongoing at the moment and we are confi-
expansion in demand from domestic managers.
dent that the chances of a high recovery rate are
One of the most striking examples of a Paris-based
confident
that
the
outcome
will
be
good.”
manager that has generated most of its business out-
In the meantime, Aguilar says it has been a case of
side France is Capital Fund Management (CFM),
business as usual, and that for the most part the
which was set up in 1991, focusing initially on pub-
firm’s client base has remained loyal to CFM
licly-offered, managed futures funds.
throughout its Sentinel mishap. “We are fortunate to
“For some reason, this sector never really enjoyed
have an investor base behind us that has been able
much success in France and, after about 17 years of
to distinguish between the Sentinel situation and our
existence, had only attracted about €2 billion in as-
value as a consistent alpha generator,” says Aguilar.
sets,” says Jean-Pierre Aguilar, founder and chief
“We suffered some redemptions, but they were
executive officer of CFM. Today, CFM’s investment
much lower than they could have been. In fact, we
range is divided into three programmes and a multi-
started 2007 with $2.8 billion under management
strategy fund (Stratus) providing what it describes
and ended the year with $3.2 billion. So, on balance, it
as “an optimal blend” of its three existing pro-
was a good year for us.”
grammes. These three are an exchange-traded
That level of performance leaves Aguilar upbeat
managed futures programme (Discus), a long/short
about CFM’s prospects for 2008, in which he hopes
equity statistical arbitrage programme (Ventus) and
that assets under management can continue grow-
an equity volatility programme (Nimbus).
ing towards the $5 billion mark, and for the
According to Aguilar, no more than about 10% of
22 SPECIAL REPORT APRIL 2008
bankruptcy last year.
lated by a range of new, small boutique players, the
expansion to the firm’s repertoire that is in the
©HedgeFund Intelligence
FRANCE SINGLE MANAGER HEDGE FUNDS
pipeline. Aguilar says that those plans include
portunities in 2006 (Acropole Convertibles Europe
launching a new 170/70 equity-based product
and Acropole Convertibles Monde), Acropole set up
named after the high-level cloud type Cirrus, which
its inaugural hedge fund, Acropole Convertibles
will be marketed through the firm’s existing outlets
Arbitrage, in July 2007. Established as an ARIA EL,
in Europe and New York, as well as via the Asian op-
the fund aims to generate an absolute performance
eration that CFM is planning to open in 2008 or 2009.
by capturing opportunities linked to movements in
“We are also looking at trading some more vanilla
implied volatility. According to Martin, the fund had
OTC products, because we believe that, if we want to
returned about 4% between inception and the start of
manage $10 billion in a pure alpha-based pro-
March, 2008 – compared with a decline of around 4%
gramme, we need to tap as many sources of liquidity
for the sector as a whole.
as possible,” says Aguilar.
Jacques Joakimides, joint founder,
Acropole Asset Management
complemented by a second hedge fund, Acropole
number of other new firms launched with the ex-
Convertibles Alpha, a long/short product launched
plicit goal of plugging perceived gaps in the market.
in January, which aims to capture two sources of
For example, when Jacques Joakimides, Emmanuel
alpha, from stock-picking and convexity, which are
Martin and Nathalie Sabathier joined forces in June
relatively uncorrelated. “In very volatile markets,
2006 to create Acropole AM, they positioned them-
long/short convertible positions tend not to per-
selves as France’s first asset manager dedicated
form very well, but the fact that we are long
exclusively to convertible bonds. The founding part-
convexity in that fund is helping us a lot,” says
ners own 51% of the company, with the balance split
Martin.
between Cheyne Capital Management (with 33.5%),
The Convertibles Alpha product was launched in
UFG (14.5%) and the French insurance company,
mid-January, just as news of the scandal at Société
Matmut (1%).
Générale was about to break, and the spike in volatil-
The trio of Joakimides, Martin and Sabathier rep-
ity immediately thereafter had helped the fund to
resents the reunion of the team that developed a
return about 3.5% by early March, according to
successful convertible arbitrage management strat-
Martin. The return on both hedge funds is therefore
egy at Fortis Investments. “We launched Acropole
comfortably in line with their annualised targets.
because we were convinced by the beauty of con-
By the end of February 2008, according to
vertibles as an asset class,” says Joakimides. “But
Joakimides, Acropole was managing just under €700
we were also totally convinced that we could attract
million, roughly two-thirds of which was accounted
substantial assets by using our expertise to manage
for by the long-only products, with the balance in the
long-only and hedge funds using the same tool,
two hedge funds. Aside from the four funds,
namely convertible bonds.”
Acropole runs two dedicated accounts for pension
Martin, Acropole’s chief investment officer, explains the rationale behind putting hedge fund and
long-only expertise together long before the establishment of Acropole.
funds.
Joakimides says that funds of hedge funds make
up about 20% of Acropole’s client base, with insur-
“The idea came about at a time when the market
ance companies, banks, pension funds and mutual
funds accounting for the balance, with approxi-
were rising, which made it difficult to find interesting
mately 85% of Acropole’s assets under management
equity stories in the right sector,” says Martin. “So
in France. That share will probably diminish as
we needed to find other sources of convexity to play
Acropole steps up its international marketing.
the underlying market. In order to do that, we
Cheyne Capital, says Joakimides, will help with the
needed to get to know the options market very well,
marketing push in the UK, while in other regions he
and the best way to achieve that is to manage a hedge
says he sees no reason why Acropole should not sell
fund. Very soon we noticed that we had access to a
its products to Japan and the US.
flow than we would have had as a long-only player.”
24 SPECIAL REPORT APRIL 2008
funds, which invest in both the long-only and hedge
cap of convertibles was shrinking and valuations
much higher quality of research data and a better
Bruno de Pampelonne, chief
executive officer, Tikehau Capital
Partners
Acropole Convertibles Arbitrage has since been
Recent years have seen the establishment of a
“We will be positioning convertibles as a low-risk,
low-volatility way for non-European investors to gain
Acropole’s franchise has developed in line with
access to the European equity market, which ought
Joakimides’ expectations. Having launched two
to be attractive for Japanese and US investors,” he
long-only funds focused on European and global op-
says. “In terms of assets under management, we are
©HedgeFund Intelligence
SINGLE MANAGER HEDGE FUNDS FRANCE
slightly ahead of schedule. Our original intention was
Tikehau’s two other funds are both onshore vehi-
to reach €800 million by the end of 2008 and €1 billion
cles described by Pampelonne as more classical
by the end of 2009.”
funds: the Tikehau Credit Fund is a FCP investing in
That pace of growth will be supported by the addi-
credit, while TIM Mezzanine focuses on the mezza-
tion of a dedicated long-only Asian convertible fund,
nine debt of small and medium-sized companies,
planned for June, and by another hedge fund, details
chiefly in France.
of which the firm is keeping under wraps for the time
being.
In common with the rest of the French hedge fund
industry, leverage plays no more than a minor role in
Acropole believes its principal competitors are the
Tikehau’s strategy. “We’ve always chosen to be
international convertible arbitrage funds rather than
lightly leveraged, with none of our funds leveraged by
any of the Paris-based managers. “There are plenty of
more than three times,” says Pampelonne. “We
long-only convertible funds here, but it’s hard to find
thought a year ago that the asset class was becoming
small boutiques in France doing convertible arbi-
too leveraged, and although we would like to have
trage,” says Martin. “If they do so, it’s within
been proved wrong, it is clear that this was true.”
multi-strategy funds. So we think we are the biggest
convertible arbitrage fund manager in France.”
Given the continued and unprecedented turmoil
in the global credit market, some may regard the
Another relative newcomer to the single-manager
timing of Tikehau’s launch either as exquisitely
market, which reckons it has spotted a gap in the
brave or as downright reckless. Unsurprisingly,
market that needed filling, is Tikehau Investment
Pampelonne is excited about the prospects for
Management, which was established in September
credit as an asset class.
2006 and is focused purely on opportunities in the
fixed-income market.
“We believe this is a great time for investors to
get into the credit market,” he says. “The market
Ownership is split 50/50 between Tikehau Capital
has been indiscriminately sold, with pricing levels
Partners and the firm’s management, which is led by
reflecting supply and demand flows rather than the
chief executive officer Bruno de Pampelonne, who
real economy. The market will continue to be volatile,
since 2003 had been the country head for France at
but for investors prepared to look out over a two- to
Merrill Lynch.
three-year time horizon, there are tremendous
“Although Paris is a big centre for fixed-income
opportunities.”
fund management, the market is dominated by the
A long-term horizon is clearly a prerequisite for
larger banks,” says Pampelonne. “But there are no in-
credit managers in the current market environment.
dependent fixed-income managers. When we
“There are plenty of assets available, but liquidity
launched our first fund in February last year, it was
is appalling at the moment,” says Pampelonne.
with the aim of building up a range of funds covering
“However, we are mid-term investors rather than ac-
the whole fixed spectrum, ranging from relatively se-
tive traders and, in any case, some of our funds have
cure to much more dynamic funds.”
long lock-up periods, so the liquidity issue is not
Tikehau’s team of 14 now manages a suite of four
much of a concern to us.”
credit-related funds, which brought total assets
Pampelonne’s faith in the opportunities now em-
under management up from €30 million in February
bedded in the credit market explains why, for the
2007 to €210 million by March 2008. The first product
time being at least, Tikehau has no new products in
was the Tikehau Credit Opportunities Fund, a
the pipeline and no immediate plans to expand into
Cayman Islands-domiciled long/short credit fund
other areas of the fixed-income universe. “I think we
focusing chiefly on bonds, loans, CDS and swaps in
are already covering a relatively good range of
the eurozone and targeting annual returns of 10% to
risk/reward profiles and, frankly, we could triple our
15%. By December 2007, it had assets under man-
assets under management with our existing funds,”
agement of €50 million.
he says. “In these market conditions, it is difficult to
Its other Cayman-registered hedge fund, with assets of €115 million at the same date, is TSS, a credit
set targets for assets under management, but we definitely won’t be staying at €210 million.”
and structured products opportunistic fund which
Elsewhere in the single-manager world of the
was launched in November 2007, has a performance
French hedge fund universe, it is perhaps surprising
target of 15% to 20% and extends the range of eligible
that so few firms have turned their hand to operating
credit instruments to CDOs, CLOs, MBS and RMBS.
exclusively in the long/short equity arena. However,
©HedgeFund Intelligence
Keith Ney, fund manager,
Carmignac Gestion
Philippe Sanlaville, chief executive
officer, Exane Asset Management
SPECIAL REPORT APRIL 2008 25
FRANCE SINGLE MANAGER HEDGE FUNDS
SYSTEIA ENTERS
TRANSITION PHASE
One of the more significant players
on the French hedge fund scene
in recent years has been Systeia
Capital Management, a part of
the Crédit Agricole/Calyon financial group.
Systeia was initially founded in
2001 by former Barep senior executives Jean-Louis Juchault and
David Obert with backing from the
Credit Lyonnais group – which later merged with Crédit Agricole.
Over the years, the firm’s total
assets under management have
grown to about $1 billion, and only
this February Juchault and Obert
finally sold out their minority stake
to the bank and left the firm. The
new CEO is Andrew Watson, a veteran of Crédit Agricole Asset Management (CAAM) and Calyon, and
who was already previously on the
Systeia board. The non-executive
chairman is now Pascal Blenquet,
CIO of CAAM.
Systeia, as the name suggests,
has been best known historically
for systematic trading strategies –
including managed futures and
quantitative equity market-neutral
funds. Last year, all of the firm’s
main strategies – Systeia Futures,
Systeia Equity Quant and Systeia
Global Macro – performed comfortably above the EuroHedge medians – and all have made a solid
start to the year again in 2008.
26 SPECIAL REPORT APRIL 2008
a notable exception to that rule is Exane Asset
more anchored in fixed income. “French institutions
Management, which was set up in 2001 and, at the
are very conservative and I think they are right to
end of 2007, managed €1.7 billion in pure
be,” says Sanlaville. “But an understanding is grow-
long/short equity funds.
ing that a long/short equity strategy managed
According to Exane Asset Management’s chief
properly is actually a very conservative approach.”
executive officer, Philippe Sanlaville, assets under
Another manager that obviously sees strong po-
management have doubled each year in the last
tential in long/short equity is Carmignac Gestion.
three years, from €400 million at the end of 2005
Set up in 1989, it has established a solid reputation
through €800 million at the end of 2006. But, as
as a strongly fundamental, research-based long-
Sanlaville concedes, gathering fresh assets in 2008
only equity manager, which by early 2008 had
will probably be considerably more challenging than
some €13 billion under management. In December
it was in any of the previous three years.
2006, it launched its first global long/short
Sanlaville says that Exane distinguishes itself
equity fund, which was seeded internally with €80
from other long/short equity managers in a num-
million, but was not offered to external investors
ber of ways. “One of our features is that all our
until early 2008.
funds are quite defensive,” says Sanlaville. “They
Keith Ney, manager of the new fund, says it is a
maintain a net exposure to the market of between
market-neutral vehicle with a portfolio construction
plus 35% and minus 10%, and we do not pretend to
discipline that keeps its net exposure within a 20%
be pure market neutral.”
band, with an annualised performance target of be-
A second way in which Exane differs from other
managers, especially in France, is in its thematic
tween 10% and 12% and a volatility target of between
4% and 6% – targets that were achieved in 2007.
range of funds. In addition to two generalist funds,
Ney explains that, although Carmignac is known
Exane offers a selection of funds covering a range of
as a long-only manager, adding the long/short prod-
industrial sectors, the most popular of which in re-
uct was a perfectly logical step. “Especially over the
cent months has been the Templiers fund, a
past five years, the philosophy that has been
long/short vehicle covering financial stocks.
ingrained across all the funds in the group has been
Launched in 2005, by early 2008 Templiers’ assets
one of absolute return-driven investing,” he says.
under management had reached €460 million which,
“So we’re not benchmarked at all, but put our money
as Sanlaville says, is an impressive result for a sec-
behind the themes and companies that we most
tor-based product. That makes the Templiers fund
favour. Additionally, across all our funds, depending
second in size only to Exane’s flagship Gulliver fund,
on their mandate, we have the ability to hedge port-
a generalist long/short product created in 2001 with
folios and reduce exposure to markets when we are
assets under management of €680 million and a his-
uncomfortable with them. In our largest fund, for ex-
torical volatility of 3%, which compares with volatility
ample, Carmignac Patrimoine, which is a balanced
targets of up to 6% for the sector-based funds.
equity and fixed-income product, we have the flexibil-
In addition to its seven single manager funds,
ity to reduce the equity exposure to zero.”
Exane offers three internal funds of funds, named
Including a long/short fund to the Carmignac
Pleiade 2, 5 and 8, with volatility targets of 2%, 5% and
range was therefore seen as a natural extension of
8%, the most successful of which – Pleiade 5 – has
its absolute return UCITS IIII product line, but with
assets under management of €500 million even
the added ability to short individual stocks. “With
though it has a history of less than two years.
the new fund, we wanted to continue to use our
“January provided something of a stress test for the
stock-picking expertise but to take directionality out
Pleiade products,” says Sanlaville. “However, even in
and reduce volatility,” says Ney.
a short, 12-month period, the volatility of all three
In terms of its future size, Carmignac has no spe-
funds remains well below their targets, so we have
cific target in mind. But Ney admits that anything
been very comfortable with our volatility levels in
between €500 million and €1 billion would probably
the Pleiade range.”
be a realistic objective. “I’m not worried about any
Sanlaville explains the relative shortage of dedi-
size constraints given the global equity universe,” he
cated long/short equity players in France by saying
says. “In the long-only area, we already manage two
that the culture among French institutions – which
€2 billion funds, so we have plenty of experience in
make up about 85% of Exane’s client base – remains
managing large funds.”
©HedgeFund Intelligence
SGAM Al Alternative Investments,
a leading provider of state-of-the-art
hedge fund investment solutions.
SGAM AI Hedge Fund Group is a major provider of hedge fund of funds, multi-strategy and single strategy
hedge funds with EUR 8.7 billion AuM. Headquartered in Paris, the division has 131 employees including offices
in New York, London, Hong Kong and Tokyo. Investment, trading and strong risk management characterize
SGAM AI Hedge Funds Group's funds and services. Furthermore, the company prides itself on its innovation
and is a leader in the development of products such as fund of hedge funds, single hedge funds, equity overlay,
volatility, alpha solutions and portable alpha. www.sgam-ai.com
Contact: +33 (1) 56 37 87 85
hedgefunds@sgam.com
Active.
Investing.
FRANCE HEDGE FUND START-UPS
Entrepreneurs battle on
despite downturn
Although it is much easier to start up in other countries, groups of French entrepreneurs
are setting up their investment boutiques and trying to win the hearts and minds of
investors – despite the recent slumps in the market and regulatory barriers
It was US President George Bush who was credited
abandoned the relative security of life within a large
– quite wrongly, as it turned out – with saying that
institution? Far from it.
“the problem with the French is that they have no
word for entrepreneur”.
Joel Benarroch, chief executive
officer and chief investment officer,
B PHI Capital
ised with a silo approach, with one desk looking at
Try telling that to people like Rémy Pierre and
credit, one focused on convertibles, one on volatility
the other former members of the Ixis equity-linked
and so on, and it’s the same structure at the big
department who established the 100% independ-
hedge funds,” says Pierre. “We were convinced that
ently-owned Anakena Finance in May 2006. Five
there was great value to be derived from building a
months later, Anakena launched its first hedge fund
team that is able to trade across asset classes and,
– the Cayman-registered multi-strategy Maximus
although we may have made some mistakes in
Fund, which returned 3.57% between the start of
January, we still believe we will be able to generate
October 2006 and the end of the year, and a further
profits for our investors in any kind of market envi-
10.44% in 2007.
ronment. After all, our team was profitable for nine
Unfortunately, much of that stellar performance
was eroded in January, which after a stable start be-
years in a row, and that was in good as well as bad
markets.”
came something of a horror story for Anakena (as it
Like the Anakena team, Eric Robbe, Arnaud
did for many funds), somewhat undermining the
Yvinec, Gabriel Teodorescu and David Lenfant had
derivation of the manager’s name. Anakena is one of
highly impressive track records as prop traders
the beaches on Easter Island and is famous for 900
when, early in 2007, they decided to use the experi-
‘Maoi’ basalt statues which, according to the man-
ence they had gained since 1990 on the equity desk
ager’s website, have withstood “nearly 3,000 years
at CIC to set up Laffitte Capital Management.
of weathering and remain today as symbols of solidity, serenity and continuity”.
28 SPECIAL REPORT APRIL 2008
“When you’re in a big institution you are organ-
Laffitte’s inaugural fund, a merger arbitrage product, was launched in mid-December last year, which
Pierre says that, by 18 January, Maximus was flat
Robbe and Lenfant see as the first in a family of
for the month. Then, a combination of extraordi-
funds offering exposure to a complete selection of
nary events, including the Société Générale ‘rogue
single strategies, including event-driven, distressed
trader’ crisis and the unprecedented intra-meeting
situations and long/short equity as well as convert-
75bp rate cut by the US Federal Reserve, led to may-
ible bonds.
hem in volatility levels on either side of the Atlantic.
The risk arbitrage fund, which had assets under
The upshot was that, in the second half of January
management of below €10 million as of February
alone, Maximus lost almost 7% of its value.
2008 – which Robbe and Lenfant believe will soon
So did Pierre and his team look back during those
be seeded to take it to at least €50 million – is fo-
turbulent late January days, wishing they had never
cused principally on announced merger deals in
©HedgeFund Intelligence
HEDGE FUND START-UPS FRANCE
Europe and the US, and draws from a historical data-
been much more open to new ideas than would be
base of more than 500 M&A-related transaction
suggested by their conservative image. “The asset
strategies.
managers we have met in France have been very
Robbe reports that the fund has made a promis-
happy to meet new hedge fund managers,” he says.
ing start, delivering a return of 2% in February in
“Their view is: why invest in hedge funds in London
very challenging market conditions. He believes the
and New York when a local manager can provide
timing of the fund’s launch is auspicious, given the
similar returns and volatility?”
potential for M&A activity on either side of the
Another wholly independent, recent new entrant
Atlantic. “The M&A market tends to be very active at
to the market that believes it will be able to exploit
the beginning and the end of economic cycles, and
shifting investor preferences is B PHI Capital, which
we are expecting the same pattern to be followed
received its regulatory approval from the AMF in
this year,” he says.
June 2007. B PHI’s CEO and chief investment officer
Perhaps the most intriguing element of the
is Joel Benarroch (hence the ‘B’ in the firm’s name)
Laffitte story is in the positioning of its product with
who has over 20 years’ experience of fundamental
investors because the merger arbitrage is effectively
research, analysis and portfolio modelling, 15 of
a US-style fund that is offering something new to a
them spent at Dean Witter Reynolds and Jefferies.
client base that is mainly French. “We want to bring
He explains that the B PHI investment philosophy
something genuinely new to the Paris market,” ex-
is based on four simple convictions. “First, we be-
plains Lenfant. “A lot of the hedge funds in the
lieve that the equity product is the best way to
French market are cash-enhanced products, and we
participate in economic growth,” he says. “Second,
wish to offer investors a pure hedge fund based on a
we like stock exchanges and favour listed compa-
single strategy and the sort of transparent processes
nies over OTC or unlisted ones. Third, we don’t like
you find in the US.”
leverage, which we think can be a very dangerous
How, then, to tailor the fund’s prospective returns
tool when you’re talking about investment. And
and volatility targets to cater to a more conservative
fourth, we see volatility as an impediment to long-
French investor base, while also ensuring that the
term performance.”
product could appeal to a broader international audience?
And he notes: “Our idea was to develop a product
our investment universe, which is mid- to large-cap
in the region of 6% to 8%, but we realised when we
equities listed in the Eurozone, while minimising
started to meet investors in London that they were
volatility,” says Benarroch. “How will we do that?
expecting to see something like 15%, and did not
By combining a fundamental value-based approach
seem to worry if volatility levels were as high as 7% or
on the stocks in our universe with a derivatives
8%, which is the opposite of what French investors
approach.”
would expect,” says Lenfant. Hence, Laffitte’s deci-
B PHI’s Value Square Euro Fund was authorised
sion to position its funds between the two worlds,
by the AMF in July 2007, with Benarroch reporting
with a performance target of about 12% and a maxi-
that the product has a target of delivering returns of
mum volatility level of 5%.
between 6% and 9% with one third of the volatility of
the underlying markets.
could be a sweet spot that attracts international as
“We started to invest in mid-September and were
well as local investors, or a blind spot that falls be-
fully operational by the start of October,” says
tween two stools and attracts neither. To date,
Benarroch. “Between inception and the end of
however, Lenfant believes that it is clearly doing the
February, our fund was down by about 2% compared
former.
with a decline in the market of 16%. So we have al-
“It is true that, before last summer’s turmoil, this
target may not have been aggressive enough for US
ready achieved one of our objectives, which is a
much lower volatility level.”
or Swiss investors,” he says. “But, following the
Benarroch is convinced that the market has
credit crunch and bearing in mind that our leverage
undergone a fundamental change over the past 12
is about two times, we now match international stan-
months and that this metamorphosis has dovetailed
dards much more closely.”
very neatly with the B PHI philosophy in at least
As for French investors, Lenfant says they have
©HedgeFund Intelligence
David Lenfant, managing partner,
Laffitte Capital Management
that would achieve the long-term performance of
“The average return of French alternative funds is
That, of course, could work in one of two ways: it
“The asset managers we have
met in France have been very
happy to meet new hedge fund
managers. Their view is: why
invest in hedge funds in
London and New York when a
local manager can provide
similar returns and volatility?”
two ways.
SPECIAL REPORT APRIL 2008 29
FRANCE HEDGE FUND START-UPS
are not very prepared to bet on small firms like ours
and to provide the same flow of very early stage investment that you see in Anglo-Saxon countries.”
Other new entrants to the market echo the view
that seeding is surprisingly hard to come by in
France. Saturne Capital was set up in early 2006 and,
at the start of March this year, launched its first
fund, the Saturne Capital Cayman-registered Global
Macro VAR 10. This vehicle aims to use futures and
From left – Gabriel Teodorescu, David Lenfant, Arnaud Yvinec and Eric Robbe,
Laffitte Capital Management
options on stock indices, interest rates, currencies
and commodities to deliver an annual absolute return of 15% with a maximum volatility of 8%.
The first is the change in attitudes to leverage.
That obviously makes the fund much too new to
“The prime brokers we saw when we were setting up
draw any conclusions about the effectiveness of its
asked us how we could call ourselves an alternative
management style, but the CVs of its founders sug-
fund if we had no leverage,” says Benarroch. “Today,
gests that there will be no shortage of experience in
I think most people would agree that the market
the Saturne team. Its CEO, Georges Fezenko, led a
would not be in the predicament it is in if people had
team of proprietary traders at Credit Lyonnais (and
had less appetite for leverage a few months ago.”
then at Calyon) in Paris, London and Frankfurt,
The second development playing into the hands
while its other partners, Frédéric Demonchy and
of B PHI, according to Benarroch, has been the
Thomas Iriart, were previously on the trading
blow-up in the OTC derivative markets and the de-
desks of Credit Lyonnais and Société Générale
bate over mark-to-model versus mark-to-market
Asset Management.
pricing mechanisms. “A clear preference has
Saturne’s COO, meanwhile, is Roland Voirin,
emerged demonstrating the importance of liquidity
who spent 32 years at Citibank in Paris, latterly as
and pricing transparency when you’re managing in-
CEO, before joining the Deutsche Bank team that
stitutional money,” he says.
managed the Banque Worms liquidation process.
Fair enough. But how does a newcomer like B
When Voirin was approached with an offer to join
PHI, which is completely independent and has no
Saturne, he jumped at the chance; as he says, it is
track record, set about raising the assets under
much more fulfilling to be involved in launching a
management that it will need to achieve anything
new company than liquidating an old one.
like critical mass?
for Saturne, the process of raising assets from in-
Although Benarroch says that he has soft commit-
vestors appears to have been a casualty of sub-prime
ments for an additional €10 million from a client
jitters. Saturne’s initial approaches to institutions in
base made up chiefly of French and continental
the first half of 2007 went well enough, says Vorin,
European institutions, he concedes that this is
with investors advising the new fund to opt for an
hardly a felicitous time for fund-raising, for a num-
offshore rather than an onshore structure.
ber of reasons.
30 SPECIAL REPORT APRIL 2008
Fulfilling, perhaps. But also challenging because,
To date, B PHI has gathered about €7 million.
Those same investors, however, cooled after
Quite apart from wanting to see a demonstrable
August, with some previously promising prospects
track record, institutions looking at a small player
telling Saturne that they were putting all allocation
like B PHI have the added problem of internal limits
decisions on hold until further notice. Potential
for direct investment which prevent them from tak-
seeders, meanwhile, also gave Saturne an unenthu-
ing more than 5% or 10% of an individual fund.
siastic response. “We were only looking for seed
Another complication for smaller newcomers,
funding of between €10 million and €30 million,”
says Benarroch, is the relative dearth of seed fund-
says Voirin. “But even for that amount, the seeders
ing in the French market. “We have had no seeders
we spoke to said they wanted a six- to 12-month
– not necessarily by choice,” he says. “There are
track record.”
perhaps five or 10 incubators in France, but they
Faced with an apparently unanswerable chicken-
are very different from those that you see in mar-
and-egg conundrum as far as raising external fund
kets like the US or the UK. It’s very clear that they
raising was concerned, Saturne’s founders will be
©HedgeFund Intelligence
HEDGE FUND START-UPS FRANCE
relying on their own investment as they build a
fund – while the sixth is an emerging markets multi-
track record for their inaugural fund. While he
strategy fund located in London and Prague.
acknowledges there are clearly risks associated
Globally, Alpha has not had any shortage of can-
with this approach, Voirin is confident about
didates for seeding. According to Rolland, it sees
Saturne’s longer-term prospects.
an average of 150 potential projects a year, meaning
“We were never expecting anybody to put in €100
that it has evaluated more than 500 since its incep-
million on day one, but we have a number of in-
tion. However, he says that French opportunities
vestors who are looking to participate in the future,”
are still relatively thin on the ground compared to
says Voirin. “I wouldn’t describe these investors as
those in other markets, and that it has been at-
having made commitments, but they have indicated
tracted to funds outside France – as well as in a
that they intend to put in at least €25 million by year-
range of different strategies – for diversification
end. Of course it’s a risk, but we are certain that the
reasons.
risk is small, given that we will be showing good
“A trend we like is that, as markets become more
regulated in emerging economies, it becomes
absolute returns on a monthly basis.”
Not all the newcomers to the market tell a simi-
possible to deploy more strategies and to find more
larly downbeat story about the availability of
talented local managers,” says Rolland. “That is
seeding for players, without a track record, as inde-
why we have looked to eastern Europe and
pendent operators. Robbe and Lenfant at Laffitte
Singapore for new opportunities.”
report that deals with seeding partners in France
Whether all the 100% independent newcomers to
and overseas are in progress, helping to bring as-
the French hedge fund industry will be able to sur-
sets under management at their new merger
vive and prosper in an increasingly competitive
arbitrage fund to €50 million.
market is open to debate. At Asterias, Sophie van
Nevertheless, it would appear that some of the
Straelen says that she admires the bravery of the
most active hedge fund incubators in the market
start-ups, but she also says that she is surprised
have been identifying more opportunities outside
that so many boutiques have sprung up at a time
France than they have locally. Take as an example
when fund-raising among institutional investors is
the portfolio of incubations that have been made in
more difficult than it may have been two or three
recent years by New Alpha Advisers, the specialist
years ago.
incubator established in September 2003 by the in-
One highly experienced manager, in the form of
dependent alternative investment management
Jean-Pierre Aguilar, the CEO of CFM, sounds a
group ADI.
warning when he says that, to be a successful
Antoine Rolland, the CEO of New Alpha, says
quant manager, a newcomer would probably need
that none of the six companies in which the incuba-
to invest in the vicinity of €20 million to €25 million
tor has assets of €155 million (as of the end of 2007)
on a strong and credible research capability along
is in France. Two are long/short equity funds, one
with a range of other overheads. “That means you
based in Singapore and one in New York, while New
probably need to have about €1 billion of assets
Alpha’s largest commitment is to an asset-backed
under management before you start making
lending fund in Geneva. Of the others, two are
money,” says Aguilar. “Maintaining a competitive
based in London – one of which is an India-focused
business with €200 million or so of assets is proba-
long/short equity fund and the other a commodity
bly doable, but very challenging.”
“Of course it’s a risk, but we
are certain that the risk is
small, given that we will be
showing good absolute returns
on a monthly basis”
Roland Voirin, chief operating
officer, Saturne Capital
ASTERIAS SURVEY FRANCE
THE HEDGE FUND
DIRECTORY FRANCE
www.asterias.com
YOUR ACCESS TO THE FRENCH MANAGERS
sponsored by :
©HedgeFund Intelligence
SPECIAL REPORT APRIL 2008 31
FRANCE INVESTORS IN HEDGE FUNDS
Building the investor base
French investors have been strangely reluctant to invest in their home-grown funds,
even while international buyers have flocked in. The industry, however, has plans to
encourage local investment and hopes the tide is turning in its favour
“What is interesting is that all
the dedicated mandates we
have won in the past three
years have been from
international clients. We have
been awarded mandates from
well-known US, Swiss and
South African investors, but
none from French institutions.
That is strange, given our
location and the fact that we
share the same culture”
Cyril Julliard, president and
co-founder, ERAAM
32 SPECIAL REPORT APRIL 2008
It was just the sort of imprimatur French hedge fund
and South African investors, but none from French
management needed to underscore its global com-
institutions. That is strange, given our location and
petitiveness. In September 2006, the California Public
the fact that we share the same culture.”
Employees’ Retirement System (CalPERS), which
Julliard is hopeful that this curious imbalance will
manages total assets of close to $250 billion, awarded
be redressed in the future. “I think French investors
a $75 million dedicated investment mandate to
are moving in the right direction,” he says. “Step one
ERAAM as part of its strategy for expanding into
in the diversification of their portfolios was struc-
European alternative assets. In addition, CalPERS
tured products, and step two was a move into funds of
has awarded similar mandates to UBS’s Alternative
hedge funds. We think step three will be dedicated al-
Investment Solutions (AIS) subsidiary and Ermitage,
ternative investment mandates. For ERAAM, French
meaning that ERAAM is the only continental
institutional investors are going to be the key in
European manager in the programme.
terms of marketing in 2008 and 2009.”
CalPERS has clearly been more than satisfied with
Others detect an ongoing change in the attitudes
ERAAM’s performance, which has been based on
of French investors to the opportunities provided by
standard long/short equity, fixed-income arbitrage,
hedge funds. Marc Landeau, CEO and founder of
event-driven and discretionary macro styles – be-
Olympia Capital Management, has been at the fore-
cause early this year the US pension fund doubled
front of the development of the French hedge fund
the size of the ERAAM mandate.
industry for the last 20 years, and has watched the
ERAAM’s president and co-founder, Cyril Julliard,
is naturally very proud of the CalPERS mandate –
investor base for funds of funds change beyond
recognition in that time.
given that the Californian pension giant carried out
“When I started in this industry in the 1980s, it was
exhaustive due diligence over a 12-month period on a
designed purely for high net worth individuals who
number of alternative asset managers before award-
were sick of having their money badly managed by
ing the mandates. But he confesses to a degree of
banks,” says Landeau. “There were no institutions in
mystification about why it is that ERAAM, which has
the market at all and, 15 or 20 years ago, most of the
a well-established track record, has not been able to
clients we see today would have had their security
match the success it has enjoyed with an institution
guards throw us out.”
as demanding and sought-after as CalPERS with similar mandates in the domestic market.
That’s the good news. The less positive news, says
one manager, is that the French institutional investor
“What is interesting is that all the dedicated man-
base is relatively immature – with many investors still
dates we have won in the past three years have been
insisting on fee rebates, irrespective of performance.
from international clients,” says Julliard. “We have
Others say that, although the investor base is in-
been awarded mandates from well-known US, Swiss
creasingly knowledgeable and sophisticated, it is still
©HedgeFund Intelligence
2008
Proactive
Innovative
2007
Opportunist
Diversified
2006
2005
HEDGE FUND
INCUBATION
HEDGE FUNDS
FUNDS OF
HEDGE FUNDS
2004
A DI GROUP
2003
IDENTIFYING AND
DIRECT MANAGEMENT
ASSISTING NEW FUND
OF ALTERNATIVE
MANAGEMENT
OF FUNDS
MANAGERS
STRAGEGIES
OF HEDGE FUNDS
2002
2001
2000
1999
1998
ADI
24-32, RUE
JEAN
GOUJON
75008
PA R I S
-
FRANCE
W W W. A D I - G E S T I O N . C O M
FRANCE INVESTORS IN HEDGE FUNDS
highly conservative compared with institutions else-
UFG Alteram, for example, has so far focused ex-
where in continental Europe, let alone those in the
clusively on the domestic institutional investor base
US. That conservative approach continues to shape
– but has recently been analysing the possibility of
the strategy of many France-based hedge funds.
stepping up the marketing of its successful ensemble
At Acropole, a relative newcomer to the market
that is focusing exclusively on convertibles through
Xavier Lépine, chairman of
management board, Groupe UFG
vestor community.
long-only as well as hedge funds, chief investment
“We recently did a survey to see how competitive
officer Emmanuel Martin says that its relatively
our funds would be in the international market,” says
modest performance target of 7% reflects the conser-
Xavier Lépine, the chairman of Groupe UFG’s man-
vative preference of the domestic investor base.
agement board. “We noticed very clearly that while
“In an environment where everything is going
we were towards the bottom of the second quartile in
wrong, we tend to outperform our competitors, as we
terms of performance, we moved up to the first quar-
did in 2005 when we were at Fortis Investments,”
tile when we looked at measures like volatility,
says Martin. “If the market trends strongly upwards
drawdowns and performance relative to drawdowns.”
on the credit side, we will lag behind the competition,
but that is understood and accepted by our clients.”
He adds: “It is on our agenda to sell more aggressively into international markets, especially in
The enduring conservatism of the French investor
Switzerland, Spain and Italy, and there are probably
base has certainly dictated the strategies of a number
two ways that we can tackle the market outside
of other newer players in the Paris hedge fund indus-
France. Either we can target the more defensive in-
try. Take Tikehau Investment Management, which
vestors, as we do in France, or we can leverage our
was founded in September 2006 and aims to capi-
products in order to bolster their return potential. If
talise on dislocations in the credit market.
we did that, we would lose a little bit of Sharpe ratio be-
For the time being, says Tikehau chief executive
officer Bruno de Pampelonne, its client base is pre-
cause of the cost of financing, but we would still have
the same underlying strategies and diversification.”
dominantly non-French. “We are making an effort to
One potential source of investment that has yet to
increase our domestic client base, but it is true that a
live up to its potential in France is the retail investor
weakness of the French marketplace is the shallow-
base. By European standards, France has a very low
ness of the institutional investor base, which
minimum investment level in hedge funds of just
probably makes it more difficult for a new asset man-
€10,000, although in practice many managers impose
agement company to set up in Paris than it would be in
their own limits that are much higher than the regula-
London,” says Pampelonne. “Dealing with French in-
tory minimum.
stitutional investors can be cumbersome, because
“When you think about it, alternatives are the ideal
they need long due diligence periods and require a
product for insurance,” says Landeau at Olympia
long track record from their managers.”
Capital Management. “Insurance is a product you
The conservative nature of the French investor
cash in when you die and, as we all know, you can’t
base has important ramifications for the strategies of
choose the date of your death. So if you happen to die
hedge funds, both at the single-manager and fund of
on a day like 20 October 1987, you’re in a lousy situa-
fund levels.
tion. First, because you’re dead. Second, because
One is that leverage among single managers tends
your equity-based insurance product is suddenly
to be very low by US or UK standards, with prime
worth much less than it was the previous day. We’re
brokers’ capacity seldom – if ever – tested by local
working on a smart way of building alternative invest-
hedge funds. It is that low leverage that leads Paris-
ment into insurance products and, if we succeed, this
based managers to say that it is highly unlikely that
will be a gigantic market.”
there will be a large-scale meltdown à la Peloton in
the French market.
34 SPECIAL REPORT APRIL 2008
of funds of hedge funds to a more international in-
Groupe UFG’s Lépine agrees that the potential for
retail investors to channel savings into low-volatility
Another impact is that fund of funds managers that
insurance products linked to hedge funds is im-
have hitherto focused exclusively, or principally, on
mense. “We won’t be selling our products directly to
the French market acknowledge that if they want to
retail investors,” he says. “But we certainly believe
diversify into other markets, they may need to tailor
there is room for a product that can use funds of
their products to meet the demands of a more ag-
hedge funds as a means of helping individuals to
gressive investor audience.
meet their asset-liability management requirements.”
©HedgeFund Intelligence
Natixis Multimanager
a major player in
both long-only and
alternative active
multimanagement
6\Y T\S[P[HSLU[LK [LHT PZ MVJ\ZLK VU HKKPUN ZPNUPÄJHU[ ]HS\L MVY JSPLU[Z
V]LY[PTL
Allocating dynamically among strategies to translate strong macro views
Selecting high-alpha portfolio managers with the ability to focus on smalland mid-size hedge funds that can often deliver a more compelling reward
WYVÄSL[OHUSHYNLYVULZ
Building multi-strategy portfolios with various risk/return features
to answer the diverse needs of our clients
5H[P_PZ 4\S[PTHUHNLY PZ VUL VM [OL THPU HJ[VYZ PU [OL -YLUJO T\S[PTHUHNLTLU[ PUK\Z[Y` ;OL ÄYT
manages Euro 6 billion in assets* and is a wholly-owned subsidiary of Natixis Asset Management.
*as of 12/31/2007, source: Natixis Multimanager
Client Service: +33 (0)1 78 40 32 81 - service.partenaires@multimanager.natixis.com
Natixis Multimanager 1-3 rue des Italiens - 75009 Paris - France - www.multimanager.natixis.com
¸:VJPt[tWHYHJ[PVUZZPTWSPÄtLH\JHWP[HSKL L\YVZ 9*:7HYPZ
(7,A;=(PU[YHJVTT\UH\[HPYL!-9 ¹
This document is not legally binding and is neither an advice nor a personalized information
SPONSOR PROFILES FRANCE
Sponsor profiles
Main sponsor
Created in 1998, Lyxor AM currently manages €73.9 billion of assets. A whollyowned subsidiary of Société Générale Group, belonging to the corporate and investment banking arm of the group, the asset management company specialises
in three businesses:
• Alternative Investments (€26.5 billion). Lyxor AM offers a broad range of hedge
funds, funds of hedge funds and absolute return funds, adhering to high riskmanagement standards and rigorous hedge fund manager selection guidelines.
Lyxor AM gained its prominence with its hedge fund platform. This platform includes more than 170 hedge funds covering all principal strategies and represents a diversified investment universe benefiting from a high level of transparency,
security and liquidity.
• Structured Management (€20.5 billion). Lyxor AM offers investment solutions to
its customers adapted to their risk profiles and return objectives. These solutions
integrate the innovations of the group into this domain. Lyxor AM also holds the
top global position regarding structured funds.
• Index Tracking (€26.9 billion). Lyxor AM offers one of the most diversified and
liquid range of ETFs (exchange-traded funds). The company is one of the top
players in the European ETF industry. Lyxor ETFs are listed in Europe and Asia
and reflect equity, bond and commodity markets. www.lyxoretf.com.
For further information contact:
Lyxor Asset Management
Tour Société Générale
17, cours Valmy
92987 Paris-La Défense Cedex
email: contact@lyxor.com
tel: +33 (0) 1 42 13 76 75
fax: +33 (0) 1 42 13 85 55
www.lyxor.com
36 SPECIAL REPORT APRIL 2008
©HedgeFund Intelligence
FRANCE SPONSOR PROFILES
ADI, a truly independent and global player in alternative investments.
Since its launch in 1998, ADI has positioned itself
as a specialist alternative investment manager,
For further information contact:
Philippe Paquet
Executive Vice President
Business and strategic development
tel: + 33 (0) 1 56 88 85 11
fax: + 33 (0) 1 56 88 85 05
email: ppaquet@adi-gestion.com
active in sophisticated, high value-added strategies
including convertible arbitrage, credit arbitrage,
• Hedge fund incubation – via the launch in 2003
of NewAlpha, a dedicated subsidiary, to detect
and support tomorrow’s hedge fund talents.
• Funds of hedge funds – via the launch in 2005
of Géa, to bring together the best hedge fund
managers.
merger arbitrage, equity long/short and event
While at the forefront of alternative investment strate-
driven, fixed income and opportunistic Asia-specif-
gies, ADI has always strived to provide the prudence
ic strategies.
and
Beyond its core business of direct portfolio management, ADI has increased its presence in alternative
investments by developing two complementary
activities:
AAAM: a global player run by an experienced team.
• AAAM’s expertise in the hedge fund area, its
transparency
demanded
by
institutional
investors. Today, ADI has over $8 billion of assets
under management and 130 personnel, offering
both open-ended and dedicated investment solutions across a full spectrum of risk/return profiles.
constructs portfolios designed to deliver stable
returns – managing the downside risk over the long
term – and has a well-diversified client base.
access to top-tier managers and its ability to idenFor further information contact:
Béatrice Ducasse
tel: +33 1.57.86.85.38
email : beatrice.ducasse@allianzgi.fr
tify alpha have been important elements in deliver-
• Despite its strong asset growth, AAAM remains
ing quality products to clients.
an entrepreneurial, dynamic, and flexible organisation of 42 professionals, with offices in Paris and
• AAAM’s product range is unique in its liquidity
New York.
terms, offering a wide spectrum of liquidity conditions (daily, monthly and quarterly) depending on a
client’s profile and liquidity needs.
For further information contact:
Sylviane Castro
tel: +44-02-7917-60-53
or +33-1-5560-2300
www.asterias.com
©HedgeFund Intelligence
• Supported by Allianz Global Investors, AAAM,
adhering to the group’s principle of client centricity,
is able to provide its investors with a high level of
• AAAM has a strong institutional approach and
service.
Asterias is an independent hedge fund consultancy
and training, all of which draw from its global
founded in London in 1999 by Sophie van Strae-
vision of the latest developments in the hedge fund
len. The company supports hedge funds and as-
industry. Asterias’ market analyses have become
set managers’ clients through three types of
standard references for investors, fund managers
services: distribution capability, market research,
and opinion leaders.
SPECIAL REPORT APRIL 2008 37
SPONSOR PROFILES FRANCE
For further information contact:
Cyril Julliard
ERAAM
49 – 51 avenue George V – 75008
Paris
tel: 00 33 1 53 43 20 80
For further information contact:
HDF Finance S.A.
40, rue La Pérouse
75116 Paris - France
main: +33 1 44 17 12 34
fax: +33 1 44 17 12 35
www.hdf-finance.com
ERAAM (Europanel Research & Alternative Asset
The investment bank Quilvest acquired a 17% hold-
Management) is the only French multi-management
ing in ERAAM in June 2005. Quilvest, which has a
company dedicated exclusively to Europe-based
150-strong partner base, manages over €4.5 billion
hedge funds managers. Created in 1998 by Cyril
of assets, including €1.4 billion in alternative asset
Julliard and Bertrand Van Houtte, in 2002 ERAAM
management.
was one of the first alternative asset management
In 2007, ERAAM was awarded first prize in its cate-
companies to receive AMF accreditation. The com-
gory at the “Tremplin Innovation & Asset Manage-
pany offers single-strategy and multi-strategy funds
ment” organised by Multiratings, and was assigned
of funds through open-ended funds but also
an ‘IP2’ Investment Process rating for its alternative
dedicated mandates for institutional investors. As of
multi-management investment process. In 2008,
end of January 2007, ERAAM reached €923 million
ERAAM was nominated at the InvestHedge Fund of
under management on behalf of institutional and
Funds Awards 2007 in two categories: European
private investors.
Equity and European Multi-Strategy.
Created in 1986, HDF Finance (HDF) is one of the
appreciation by consistently applying a rigorous
first established independent asset managers in
investment process and strict risk control procedures.
France. HDF is registered and regulated by the
HDF targets medium-term returns higher than direc-
French financial markets regulator AMF. Since its
tional management styles but at lower levels of risk
creation, HDF’s sole activity has been the manage-
and volatility. The 27 funds managed by HDF are both
ment of alternative and long-only multi-manager
multi-strategy and single-strategy funds of hedge
funds.
funds, covering all asset classes and regions, and are
HDF provides superior investment solutions to institutional, corporate and private clients. HDF’s invest-
HDF currently manages $6 billion and operates
ment philosophy is based on two objectives: to
five offices: Paris, Brussels, Geneva, New York and
preserve the invested capital and generate capital
Singapore.
Natixis Multimanager is the multi-management
funds of hedge funds and our segregated
subsidiary
accounts demonstrate over three years of track
of
Natixis
Asset
Management.
With €6 billion of assets under management*,
Natixis Multimanager is one of the main players in
For further information contact:
Client Service
Natixis Multimanager
1-3 rue des Italiens
75009 Paris
tel: +33 (0)1 78 40 32 81
service.partenaires@multimanager.natixis.com
registered either in France or in Luxembourg.
the French multi-management industry in both
long-only and alternative strategies.
record.
At Natixis Multimanager, we strive to be flexible and
swiftly deploy our investment choices having
performed exhaustive financial and operational
Natixis Multimanager benefits from more than 10
due diligence analysis for underlying hedge funds.
years of asset allocation and fund selection
Our investment team dynamically allocates among
experience and offers a conviction-based ap-
strategies to translate its strong macro views and
proach to money management. With assets under
has the ability to offer tailor-made portfolios for
management of over €1 billion*, our open-ended
client specific constraints.
*at the end of December 2007
38 SPECIAL REPORT APRIL 2008
©HedgeFund Intelligence
FRANCE SPONSOR PROFILES
Founded in 1989, Olympia Capital Management is
and has one of the longest track records in the
an international investment management group
industry of over 17 years.
that manages more than $6 billion of assets in
funds of hedge funds, investment funds and invest-
The group is one of the largest independent fund of
ment portfolios.
hedge funds managers in Europe, employing 80
Olympia Capital Management specialises in multi-
people, with operations in Paris, New York, London,
strategy and multi-manager funds of hedge funds
Zurich and Hong Kong.
For further information contact:
France Jean-Luc Bianchi tel: +33 1 49 53 90 38
Switzerland Eleonora Rajmann tel: +41 44 242 02 22
United Kingdom Jon Amess tel: +44 207 389 99 02
www.olympiagroup.com
For further information contact:
email: hedgefunds@sgam.com
www.sgam-ai.com
A subsidiary of the Société Générale Group, So-
strategy hedge funds with €8.7 billion AUM*. Head-
ciété Générale Asset Management (SGAM) is one
quartered in Paris, the division has 131 employees*
of the world’s leading asset managers, with €358
including offices in New York, London, Hong Kong
billion AUM*.
and Tokyo.
SGAM Alternative Investments (SGAM AI), 100%
Investment, trading and strong risk management
subsidiary of SGAM, manages €50.6 billion of
characterise SGAM AI Hedge Funds Group’s funds
assets* in the largest scope of alternative invest-
and services. Furthermore, the company prides
ments: hedge funds, structured products, private
equity and real estate.
itself on its innovation and is a leader in the development of products such as funds of hedge funds,
SGAM AI Hedge Fund Group is a major provider of
single hedge funds, equity overlay, volatility, alpha
hedge funds of funds, multi-strategy and single
solutions and portable alpha.
*as at 31 December 2007
Systeia Capital Management was created in
Systeia Capital Management offers investment
December 2000 in order to provide a spectrum of
solutions to institutional investors, funds of funds,
alternative investment products.
family offices, banks and other professionals on a
Systeia Capital Management manages $1 billion in
For further information contact:
43-47 avenue de la Grande Armée
75116 Paris
tel: +33 (0)1.58.44.12.53
fax:+33 (0)1.58.44.12.09
www.systeia.com
©HedgeFund Intelligence
assets as of 28 December 2007. The firm devel-
long-term horizon (2-5 years) through investment
strategies available in euros and in US dollars.
ops a range of hedge funds and managed
The firm is fully owned by Credit Agricole Asset
accounts which meet clients’ needs. Systeia is
Management. Systeia Capital Management is reg-
currently composed of more than 30 employees.
ulated by the French Authority AMF.
SPECIAL REPORT APRIL 2008 39
Christophe Baurand Head of Sales and Marketing Alternative Investments
Pauline Chatin Institutional Investor Relationships Switzerland and Luxembourg
Vincent Archimbaud Institutional Investor Relationships France
Edwige Novacq Institutional Investor Relationships France
AlternativeInvestments
Gain a sharper insight into
alternative investments
from our experts
Over the last decade Lyxor has set the pace in alternative investments by offering unique hedge fund investment opportunities combining risk management, transparency, liquidity and performance. Lyxor’s renown and expertise are based on its
hedge fund platform, a world leader in terms of number of funds and strategies covered. Lyxor’s experts offer an extensive
selection of innovative alternative investments, from funds of funds harnessing the Lyxor platform’s advantages to arbitrage
funds aiming to generate positive performance regardless of market conditions. Lyxor AM currently ranks in the top 10 alternative funds managers in the world, with assets under management in excess of EUR 26.5 billion.
Meet our experts in alternative investments: +33.1.42.13.76.75 / contact@lyxor.com