Hedge Fund Awards 2014

2014 International Hedge Fund Awards would rather set up a new office than risk losing a desirable manager due to location issues. “Our infrastructure is very flexible,” says Hughes, “and we have the support of our parent, Guggenheim Partners be- hind us in terms of setting up offices relatively quickly.” By paying attention to detail and knowing what was im- portant to portfolio managers, Katzovitz and Hughes have been extremely successful in attracting experienced tal- ent. At the time of writing, GGT had 17 portfolio managers, which Katzovitz and Hughes see growing to 25 to 30 over time as the firm grows. Tomorrow’s infrastructure today A key component of Guggenheim Partners’ commitment to GGT was the more than $50 million investment in infra- structure, risk systems, people, etc. In designing the infra- structure, GGT was aware of the need for robust risk and compliance systems, as well as the demands of portfolio managers and the transparency requirements of investors. Investors are no longer satisfied with simply receiving re- turn statements. Katzovitz and Hughes have paid close at- tention to client communication and reporting. “We believe that investors are becoming more sophisticated and are requesting, as they should, more information on how their capital is being managed: for example, leverage, exposures and position concentrations. Hedge funds have been re- luctant to provide clients with this information on a timely basis and we believe this is unreasonable.” says Hughes. “Providing clear information gives investors confidence and the ability to get a better understanding of returns on a risk adjusted basis. Real transparency is something Lo- ren and I believe has been missing from hedge funds. We have put a tremendous amount of resources into develop- ing systems that allow investors to get an understanding of how their money is being managed. It’s an important element of what makes us different.” Katzovitz adds: “The vast majority of GGT’s returns have been from alpha, rather than from beta, even as we have focused on low net exposure strategies. Our reporting ca- pabilities allow our investors to better understand what is driving our returns. “The hedge fund world often carries significant beta expo- sure, a driver of both their returns and correlations. Howev- er, institutional investors are becoming more demanding in their desire to pay performance fees for alpha as opposed to beta. Clients want to see that a majority of a fund’s per- formance is driven by security and industry selection, and not merely from overall market exposure. “The past few years have seen a number of changes in reporting and regulatory requirements, so a key objective was to make as much use of automation as possible. We have gone to great lengths to use technology to our ad- vantage,” says Katzovitz, “it was a major resource com- mitment.” The investment in infrastructure does not just cater to to- day’s activities; it’s geared to allow for flexibility in anticipa- tion of an evolving compliance and regulatory environment. Katzovitz believes that there will be a convergence of regu- latory requirements as between what is best practice in the long only world and in the hedge fund industry over the next four to five years. As a by-product, there will also be changes in reporting requirements across the US, Europe and Asia as reporting becomes more standardized globally. Albourne’s ‘OPERA’ and Risk Metrics are perfect examples of how the institu- tional world is requiring standardization of risk measures globally for all hedge fund products. “It means we have to be adaptable,” says Katzovitz. “Cli- ents want different things and will require reporting in a range of formats. The days when clients received perfor- mance information once a month have long gone. Now cli- ents are looking for a lot more information and granularity.” GGT, which currently has 65 employees, was established three years ago. Katzovitz and Hughes spent the first year building out GGT and firmly establishing its foundation, and the subsequent two years managing money exclusive- ly for Guggenheim. GGT has only recently begun to market to outside investors. Their initial outside money came in this past November. Like any good meal, preparation is the key to success. It is this same preparation that Katzovitz and Hughes have put into developing and structuring GGT, and it is the reason they have been awarded the Overall Multi-Strategy Hedge Fund of the Year award. 9 www.acquisition-intl.com Manhattan Bridge and skyline At Night, New York City