Decomposing FoHF returns
Where and when funds of hedge funds add and lose value
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25/03/2010
Editor's view: 25 March 2010
You only had to glance at the British press this week to appreciate that politics is a dirty business. As a slew of UK politicos were caught up in a sting operation that made them appear at best, criminally stupid, at worst, guilty of graft, one wondered why bankers are still the public’s hate figures of choice, when elected representatives are just so much better at repeating the same mistakes.
If you’re a financial services type, the sense of Schadenfreude must be overwhelming. And yes, it’s the sort of convenient moral relativism that is tempting. But also wrong. Just as the whole of the hedge fund industry can be besmirched by a handful of blow-ups and shady deals, politics is equally let down by a similar smattering of the personally ambitious and greedy.
Judging any sector is all about retaining a sense of proportion. It’s a sentiment that European Union representatives should bear in mind this week, as they continue to mull over the draft AIFM Directive. Last week’s eleventh-hour intercession by Gordon Brown, backed by an apparent fraternally minded climb-down by President Sarkozy, means a process that has sped ahead of a more globally orientated solution can now slow down and take stock.
There is even a growing hope that if the breaks are applied sufficiently, the moribund G20 initiative – the trigger for the EU’s draft – may even catch-up when its finance ministers meet in Washington next month. Sources suggest that an agenda-setting G20 ‘sherpas’ meeting in Montreal has already placed international concerns regarding European hedge fund regulation near the top of the agenda, largely due to the UK’s long-stated objections and Timothy Geithner’s own written concerns.
Geithner’s letter worked because it made people realise that there was no consistency about this document; something that was meant to be about financial stability had become overly politicised and protectionist. Hopefully, with the G20 guided by Iosco technocrats, a recalibrated EU draft could emerge. Reflecting actual economic realities and ending in a cleaner business for all.
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What's in a name? Petra Capital Management
Formed in 2005, New York-based Petra Capital Management soon forged itself a reputation as one of the hedge fund industry’s best-known investors in the commercial mortgage-backed securities (CMBS) market.
Founder Andy Stone, an expert in real-estate debt from his time at Solomon Brothers and Credit Suisse First Boston, would even go on to be described as a ‘rock star’ in the field. His choice of moniker for his hedge fund project certainly lends itself to Stone’s background – and more than just in name and reputation.
Petra is, of course, a historically and archaeologically significant city in Jordan, renowned for its architecture cut into the rock face of its central valley. The rock-carved collection of tombs, temples and waterways is one of Jordan’s most famous symbols and tourist attractions, not to mention a regular in popular culture – featuring in films such as Indiana Jones and the Last Crusade. Unesco, which made the city a World Heritage Site in 1985, described it as “one of the most precious cultural properties of man’s cultural heritage”. Most pertinently though, Petra actually means ‘stone’ in Arabic.
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