Straight Talk

October 2008

"Although, in contrast to most hedge fund firms, we have yet to generate profits from our management fee - the investments we continue to make in the infrastructure and management talent of our firm have served the fund well."

It is important to distinguish the business from the investment side. As the industry has developed, it has become apparent that a good money manager does not necessarily translate into a good business manager. Today's hedge fund manager often started as a great money manager, then became a fund raiser and eventually a business manager with limited time left for managing money, his core discipline and original reason to launch a hedge fund.

The above quote actually illustrates the manager's decision to build out institutional quality systems and people in order to create franchise value. There is ongoing debate as to whether a higher management fee translates into a more "stable" organisation. As the industry consolidates, it will be interesting to determine which was the right model.