16/06/2010 Author: Zaki Abushal

Chicago blues

With regulation at the forefront of many US hedge fund managers' concerns, HFMWeek paid a visit to the Managed Funds Association's annual conference at the Drake Hotel in Chicago, to see how the trade assocaition saw the issue playing out

The warm, muggy air blanketing New York is a sure sign that summer’s begun, and with it the similarly stifling production line of the sunny season's conference circuit. New York is home to a vast array of conferences regardless of the time of year but come the spring and early summer months the rest of the country, and for that matter the whole of Europe, try desperately to outdo one anotherin their attempts to host the perfect corporate gathering.

Investors, managers and service providers have seen it all before. It helps if the plush surroundings ease those long after-conference hours, but when all’s said and done it’s a procession of presentations and introductions. Managers, investors and service providers desperately trying to connect, huddled around spare coffee tables. And if you manage to start or nourish a lasting relationship then all the better; if you actually manage to do some real business then you’re one of the lucky few.

This week, Europe is very much in focus, with Monaco’s annual Gaim event picking up the baton from a recent slew of US events. Three weeks ago, Las Vegas hosted the SkyBridge Alternative Investments Conference (SALT), courtesy of SkyBridge Capital, a success in terms of scale, and by the look of the standing-room-only speech delivered by President Bill Clinton, attendance as well.  A difficult act to follow. Last week, it was the turn of the Managed Funds Association (MFA) to play host in Chicago’s Drake Hotel, at one of the US trade association’s two annual conferences, the other being held in Florida. This turned out to be a low-key affair with fewer than expected attendees, a fact admitted to by MFA president and CEO Richard Baker.

According to Baker, membership of the MFA has reached 2,800, and there’s a real push to pick up members outside of its managed futures core competence. This means more hedge funds but also a broader array of investors. “I am aggressively targeting university endowments and pension funds [as members]”, said Baker. An industry source wasn’t convinced targeting investors would work, “they [pension funds] don’t really care enough, hedge funds are such a small percent of their overall portfolio,” she said.  That may be true, however, Baker’s approach isn’t without its merits.  A UK-based managed futures fund felt that it had been oversold on the number of investors who were likely to attend, a common conference failing, but should Baker succeed in encouraging new members from the pension and endowment side, that could slowly change.

Clearly a key issue for the members of the MFA and the attendees, as well as a theme integral to the future well-being of hedge funds globally, is regulation. The organisers covered the topic behind closed doors with MFA Chairman Darcy Bradbury from DE Shaw. It’s expected that the US and not, as previously thought, Europe will be first to put its regulatory cards on the table, however the effects of both will go hand in hand. The MFA has had the issue of opening a European base on its agenda since last year, in part to deal with the ‘if’ and ‘when’ of European hedge fund regulation. Baker alluded to the expansion once again, acknowledging that the MFA is trying to get into Europe and open an office.

Aside from the MFA’s own strategic development, one of the more enlightening panels was delivered by a quartet of fund of hedge funds (FoHF) managers. That in itself shows something of the shift in focus at the MFA. Nonetheless, the panel offered much insight on top of these two prescient points – when two thirds of the industry is experiencing net positive inflows, three quarters of FoHFs are still suffering negative inflows; and three out of the four FoHF panellists, representing assets well in excess of $10bn,  did not actively use CTAs in their portfolio.
By the end, save for a few disgruntled attendees and a slightly nervous two-hour wait on the tarmac of Chicago’s O’Hare airport with ‘engine trouble’ before departing for New York, the punchy day-and-a-half MFA conference was still, despite growing fears of an over-regulated future, a success.