NOVEMBER 2, 2011

2 Multi-Manager Shop Expands Roster 3 Diamondback Lays Off 5 Staffers 3 Ex-Millgate Partners Prep Vehicle 3 Pamli Plans to Add Marketing Chief 4 Arcano Takes Aim at Performing Debt 4 Value Maven Seeking US Backers 4 University Freeing Up Capital 5 Odd Tale Emerges in IKOS Dispute 5 Manager Focused on Stock Offerings 6 CALENDAR 7 LATEST LAUNCHES

Harbinger Moves to Rightsize After Losses

Recruiters have been seeing a steady stream of resumes from staffers at Philip Falcones $5.6 billion hedge fund shop over the past couple of months, and the calls
Harbinger Capital is letting some employees know its time to move on.

picked up in the last two weeks. Harbingers general counsel, Robin Roger, said this reflects the fact that we are rightsizing the company for the tasks at hand, and that employees who have been given guidance to seek other employment are likely acting accordingly. Theres no word on how many of the firms 70-75 staffers might leave. Several headhunters said theyve received resumes from nearly all of the dozen back-office workers. Ive gotten some panicked calls from the front office, too, and not just from junior staffers, one recruiter said. Another recruiter said hes been fielding calls from Harbinger staffers worried
See HARBINGER on Page 5

October Gains Offset Earlier Losses for York

While many fund managers are kicking themselves for missing out on the October rally, York Capital was positioned to recoup a good portion of its third-quarter losses. Like most of its peers, York had a terrible September, posting losses that ranged from 3.5% to nearly 11% across its 10 hedge funds. The $3.3 billion York Credit Opportunities Fund slipped 5.9%, for example, while the $900 million York Select vehicle fell 10.8%. But York appears to have been better positioned than others heading into October. Because many managers were heavily hedged against further losses, they were unable to benefit from the stock markets gains last month, when the S&P 500 index rose 9.2%. Nobody has participated in this crazy rally, one manager said. Too short, too hedged. York was more nimble. Word has it that the $15 billion firm was 40% in cash at
See YORK on Page 4

THE GRAPEVINE
Portfolio manager Michael Beerman will leave Eminence Capital at yearend. Word has it that Beerman, who oversees a book of consumer and financial stocks at the New York firm, is thinking about starting his own hedge fund shop. He joined Eminence as an analyst just as the outfit was founded in 1998 by Ricky Sandler. Startup broker-dealer Tigress Financial has hired an executive to serve as its head of research and chief investment officer. Ivan Feinseth arrives next week, in a role that assigns him oversight of plans by the New York firm to start a quantitative-research desk and launch a slate of hedge funds within the next year or two. Feinseth previously held a similar research position at broker-dealer ICM Capital and before that was chief investment officer at AlphaWorks, a hedge fund
See GRAPEVINE on Back Page

Archeroak Settling Down as a Family Office

If former SAC Capital president Brian Cohn ever had any intention of establishing a hedge fund firm of his own, its now pretty clear hes going to stick to running his own money. Cohn recently laid off two staffers at his family office, Archeroak Capital, leaving only one other besides himself. Word has it that Christina Kim was one of those let go. She is best known for her tenure at Daniel Bentons Andor Capital, which shut down amid the market collapse in late 2008. Cohn spent 11 years as president of SAC before leaving the Stamford, Conn., firm in 2008 to launch Archeroak. Early on, sources said, Cohn planned to start a hedge fund operation, despite having limited experience on the investment side of the business. The idea was that he would recruit top-notch traders and analysts, while drawing on his experience at SAC to build an institutional-quality infrastructure. But apparently investors didnt buy the premise. In the end, they couldnt overlook
See ARCHEROAK on Page 2

November 2, 2011

Hedge Fund ALERT

Multi-Manager Shop Expands Roster

Typhon Capital, an incubator of sorts that invests with undiscovered managers, has added three more funds to its menu. The entities identified only as Arion Financials Program, Chiron Currency Program and Cratos Long/Short Strategy each was in operation before becoming affiliated with Typhon. They bring the number of funds on the Chicago firms roster to 10. The Arion and Chiron programs follow quantitative strategies focused on intraday currency trades. Arion also trades futures referencing the S&P 500 index and U.S. Treasury bonds, while Chiron zeroes in on the currencies of G-10 nations as a liquidity play. Cratos, meanwhile, is Typhons first long/short equity fund. It runs $120 million and has produced an average annual return of 10.9% since its inception in February 1988 beating the S&P 500 by two percentage points. Typhons other funds span a range of strategies including currency trading and special situations, plus managed futures linked to livestock, grains and oil. The firm aims to uncover specialist managers, with a concentration on veteran traders who have hung their own shingles after leaving proprietarytrading operations or hedge funds. It then offers to manage their marketing, operational, legal and investor-relations functions in exchange for a cut of revenues.

Typhons assets come primarily from Europe. Backers have the option to invest via two ready-made funds of funds or customized multi-manager portfolios, and can place capital directly in the underlying funds. The firm, which runs $70 million, has been working to expand in recent months. Most notably, it launched a securities-trading unit in New York called Typhon Securities. Typhon was founded in 2008 by James Koutoulas, who previously helped build several fund-of-funds products as chief operating officer at St. Esprit Asset Management. Koutoulas, a securities lawyer, also has managed investments in equities and futures, and has run his own information-technology consulting firm.

Archeroak ... From Page 1

the fact that Cohn had no money-management experience. However, a source close to the Old Greenwich, Conn., firm insisted that Cohns intention from the start was to manage money only for himself. In any case, he plans to maintain Archeroak as a family office going forward. Among Cohns earliest hires at Archeroak was Jeff Messina, a former Level Global analyst who covered cyclical stocks. But Messina was on board only for a short while, and currently works for Citadel in San Francisco.

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November 2, 2011

Hedge Fund ALERT

Diamondback Lays Off 5 Staffers

Diamondback Capital has dismissed at least five investment staffers including two portfolio managers in the wake of a sharp third-quarter loss. The portfolio managers are Andrea Feinstein, who specializes in energy stocks, and Marco Pinzon. Also let go was Michael Rome, whose position combined the roles of analyst and portfolio manager. In addition, two analysts who worked under Feinstein, David Donnelly and Jason Smith, were shown the door. One source speculated the layoffs could be tied to expectations of heavy yearend withdrawals suggesting the redemptions could reach $1 billion. But a person close to the firm said the cuts were performance related. While Diamondback does expect some redemptions, she said, its nowhere near the tune of $1 billion. She noted that the firms October performance was positive. The deadline for limited partners to submit yearend withdrawal notices is Nov. 15. In any case, Diamondback is known for being quick to cut investment staffers who dont perform. The Stamford, Conn., firm, which has about $3.5 billion under management, put up relatively strong returns through the first half. But like most of its peers, it suffered losses amid the market turmoil in August and September. As of Sept. 30, Diamondback Offshore Fund was down 5.1% for the year. Diamondback was under intense pressure following FBI raids of its offices and three other hedge fund firms in November 2010. But while the other firms subsequently went under, Diamondback survived and by August was fielding fresh subscription requests. The firm also started hiring again. In September, Diamondback paid $1.1 million to settle SEC charges that a former employee, Anthony Scolaro, had profited from insider trading. Scolaro pleaded guilty to criminal charges in May. The firm itself wasnt accused of wrongdoing. Founded in 2005, Diamondback is led by former SAC Capital executives Larry Sapanski and Richard Schimmel.

billion, representing a universe of about 4,200 stocks. The fund would hold 30-50 positions, roughly evenly divided between longs and shorts. LRV is trying to lure early backers with a so-called founders share class. While the marketing documents dont spell out the terms, such share classes typically involve reduced management and performance fees, among other incentives. Millgate was led by James Lyle, who co-founded the firm in 1997 after covering international stocks at Julian Robertsons Tiger Management. At its peak, Millgate had about $2 billion of assets, which it managed from offices in New York and London. The decision to shut down the operation followed two years of poor performance, including a loss in 2010 when the HFRI Fund Weighted Composite Index rose 10.5%. Rooney, Lottner and Van der Sande all started at Millgate in 2002, and all were later promoted to partner. Rooney, LRVs chief investment officer, left Millgate earlier this year. Van der Sande, who is chief executive of LRV, left Millgate in 2007 for a senior-analyst position at Carlyle Blue Wave. Most recently, he was co-portfolio manager and senior analyst at
Duart Capital.

Lottner, who left Millgate last year, is now director of research at LRV.

Pamli Plans to Add Marketing Chief

Faisal Syed has recruited a former Highbridge Capital colleague to oversee fund raising at his new hedge fund firm. Russell Brauer, who most recently worked at Goldman Sachs, will join Syeds Pamli Capital of New York upon completion of a gardening leave. His duties at Pamli will encompass business development, marketing and investor relations. The two met when Brauer joined Highbridge about five years ago. Syed was a Highbridge portfolio manager who ran at least two credit-product vehicles before leaving last year to set up Pamli. Syed has had little trouble raising capital for his Pamli Global Credit Strategies Fund. The vehicle currently has about $125 million under management, and Syed expects to take in $10 million to $20 million of fresh capital before yearend. The fund launched with a sizable seed investment from New Alpha Asset Management.

Ex-Millgate Partners Prep Vehicle

Three former Millgate Capital executives are crafting a hedge fund that would reprise Millgates strategy of investing in nonU.S. stocks. The team, led by Mark Rooney, formed LRV International of Boston shortly after Millgate began winding down its operations early this year. Indeed, marketing documents for LRVs planned fund have been in circulation at least since May. But one source said Rooney and his partners, Craig Lottner and Erik Van der Sande, have had limited success raising capital so far reflecting difficulties most startups face these days. Rooney and his team believe non-U.S. stocks present a greater opportunity set than U.S.-listed shares. Thats partly because far more stocks trade on non-U.S. exchanges about 75% of the global total and most of those companies receive little, if any, analyst coverage. LRVs focus will be on liquid shares of companies with market capitalizations of $500 million to $10

Investors have been drawn by Syeds Highbridge pedigree, as well as his early returns at Pamli. The fund was up 10.1% through Oct. 31. Syed apparently feels the fund is now large enough to justify hiring a full-time marketing and investor-relations professional. Syed had been handling those functions himself. Syed trades a wide range of credit instruments, from corporate bonds and structured products to emerging-market sovereign debt. Before starting at Highbridge, he was a member of Credit Suisses proprietary loan-trading group. Brauer spent the past 18 months as a marketer in Goldman Sachs Alternative Capital Markets group, which manages funds of hedge funds. Earlier, he worked at Blackstone Asset Management for about six years.

November 2, 2011

Hedge Fund ALERT

Arcano Takes Aim at Performing Debt

Arcano has launched a fund that invests in senior-secured debt of European companies. The Madrid firm started trading its Arcano European Income Fund on Oct. 28 with 50 million ($70 million) of investor commitments, of which it already had drawn down 15 million. The plan is to call the rest of the capital by yearend, while working to raise 150 million overall by this time next year. Backers of the fund can place their capital in an unleveraged version that aims for annual returns of 10%, or a companion that shoots for 14% gains by borrowing $1 for every $1 of equity. The entities share in the same investments. Arcano European Income is setting aside 70% of its capital for corporate-loan investments, with the rest reserved for bonds. Most of the purchases are expected to involve debt taken out by healthy companies to finance takeovers of their operations, often by buyout funds. In those cases, Arcano may identify deals via its fund-of-funds business a $1.6 billion operation that focuses on private equity vehicles. Arcano plans to pick up the debt either at the time of initial syndication or when it surfaces on the secondary market, and hold the positions to maturity. The idea is to take advantage of high yields available on European loans and bonds amid the regions recent turmoil, while staying away from distressed-asset deals. Arcano European Income gives investors the option to pocket their shares of loan-payment proceeds on a quarterly basis or reinvest the capital, as would typically be the case for a hedge fund. Fees are equal to 1% of assets and 10% of profits. The fund allows investors to withdraw capital two times per month. That sets it apart from a predecessor called Arcano Credit Fund that has a four-year lockup period. The shift reflects feedback from investors who said they preferred more liquidity. Arcano Credit Fund launched in early 2010 with 50 million. It was posting a net rate of return of 13% as of June 30. Prior to Arcano Credit Funds launch, Arcanos fund-management unit ran only multi-manager private equity vehicles. Arcano European Income is led by Manuel Mendivil. He joined Arcano in 2009 following a run as head of Merrill Lynchs principal-investment unit in Europe. His team includes Isaac Benzaquen and Alvaro Fabian. Benzaquen, who arrived earlier this year, previously founded Tel Aviv private equity firm Blue Capital, and before that was an associate at Babcock & Brown. Fabian signed on in 2009 from a position running debt funds at Goldman Sachs.

He is pitching the equity-focused vehicle to family offices and wealthy individuals in the States via his Eyquem Fund Management of Santa Monica, Calif. The fund would be Carlisles second, following the 2010 launch of his $1 million Eyquem Global Value. That entity is backed by investors in Australia. Carlisle aims to identify undervalued stocks whose prices could be driven up by catalysts like liquidations, turnarounds, the involvement of activist investors or takeovers by private equity firms. He also looks for cheap stocks based on such factors as price-earnings ratios and cashflows.

University Freeing Up Capital

Freed-Hardeman Universitys endowment plans to double its target allocation for hedge funds, potentially leading the operation to begin investing directly in single-manager vehicles. The $50 million endowment, which currently maintains a 5% hedge fund allotment, is set to approve the increase in the coming weeks. It also will decide at that time whether to invest the additional $2.5 million with a small fund of funds or directly with single-manager shops. The Henderson, Tenn., university currently has its entire allocation deployed to a multi-strategy fund of funds run by Archstone Partnerships.

Freed-Hardeman doesnt back managers that run less than $100 million. It also typically chooses those with track records of at least five years, and doesnt deal with startups. Controller Barry Smith oversees a small staff that manages the schools endowment. Freed-Hardeman is a Christian university with about 2,000 students.

York ... From Page 1

the beginning of October. Chief executive James Dinan dug into those reserves to dial up his funds exposure to risk assets, including both equity and credit investments. Dinan pursues an event-driven strategy across all of his funds. As a result, Yorks main funds posted October gains of 3-5%, estimated one investor. The source emphasized that the returns were driven not only by stock-market gains, but also by highyield bond investments. At the end of September, York appeared to be on track to deliver one of its worst-ever annual losses. The $4.9 billion York Multi-Strategy fund was off 9%, while York Select was down a whopping 25% year to date. The situation now looks less dire, though all of the funds remain in negative territory for the year. Even so, market players dont expect investors will barrage York with yearend redemption requests as almost certainly will be the case for any number of other firms. Limited partners will likely forgive managers who stuck to their core strategies through the market turmoil, as Dinan did, while punishing those who indulged in style drift.

Value Maven Seeking US Backers

The author of a widely followed blog on value investing is launching a fund aimed at backers in the U.S. Toby Carlisle, best known as the author of Greenbackd. com, wants to raise up to $10 million for his Eyquem Fund.

November 2, 2011

Hedge Fund ALERT

Odd Tale Emerges in IKOS Dispute

Former IKOS Asset Management partner Martin Coward may be a renowned quantitative analyst, but apparently he doesnt have much of a head for figures. For three years, Coward and his estranged wife, IKOS founder Elena Ambrosiadou, have been locked in a high-stakes divorce battle that has laid bare the inner workings of the $2.3 billion hedge fund shop. The London firm currently is led by Ambrosiadou, while Coward is working in Monaco to set up a competing operation. A key element of the case is a move Coward made in 2009 to secretly copy IKOS proprietary software onto a laptop computer presumably in anticipation of an intellectual-property dispute with his wife. But as was recently revealed in a court hearing, Coward proceeded to lose the program in cyberspace. What happened? According to a statement from Coward thats part of the court record, he uploaded the program to a secure cloud-based repository, but then forgot the password and evidently was unable to access the data for nine months. Coward is an accomplished mathematician who previously worked at Goldman Sachs and Investcorp. Nonetheless, he claims to have had a memory lapse. In any case, the dispute over IKOSs software may now be moot. Coward originally sued IKOS to claim part ownership of the program. More recently, however, he has said he plans to use a different quantitative model at his new firm, and has suggested hiring an outside expert to compare his software with IKOS program. Because of a countersuit from IKOS, however, the case is still before the U.K. High Court in London. Last month, a judge scheduled a trial for 2013. Meanwhile, Coward and Ambrosiadou continue to do battle on other fronts, including in divorce court. IKOS, which was founded in 1991, manages three vehicles: IKOS Futures Fund, IKOS FX Fund and IKOS Hedge Fund. Through Sept. 30, the futures fund had gained 9.6% for the year, while the foreign-exchange vehicle was up 5.9% and the hedge fund 5.3%.

Jacobus strategy is to exit a position when the price rises or falls by 5% from the funds cost, or within 20 days whichever comes first. In practice, the vehicle will exit most positions the same day of the offering. Jacobus is familiar with the venture capital market as one of 38 backers of New World Angels, a Boca Raton, Fla., investor network that deploys up to $2.5 million apiece to early-stage companies. Finser manages $400 million for wealthy individuals and institutions in Latin America. Among its clients is the Roman Catholic Church. Jacobus founded the firm, previously known as Serfincorp, in 1991.

Harbinger ... From Page 1

about the funds performance and investor unrest: Youve got a redemption date around the corner and now it looks like everyones going to get whacked on bonuses. Harbinger announced in late October that its flagship Harbinger Capital Partners 2 had seen its value decline 17% in September. That followed a strong August, when the fund gained 5% even as the S&P 500 index dropped 5.4%. Through September, the vehicle was down 13% for the year. As for the firms other funds, Harbinger Capital Partners 1 was down 11% as of Sept. 30, while Harbinger Special Situations dropped 12%. The bright spot was a 12% year-to-date gain for Credit Distressed Blue Line Fund, a $500 million closedend vehicle that is scheduled to wind down early next year. By comparison, Hedge Fund Researchs global hedge fund index showed an 5.4% decline for the first nine months of this year. Harbinger has been under pressure all year from investors seeking to withdraw funds. They have grown alarmed about the firms investment in LightSquared, a Reston, Va., telecommunications startup controlled by Harbinger. In June, Falcone informed investors that redemptions would be made at least in part in the form of non-tradable LightSquared shares. They have morphed from what they were to now a highlyconcentrated and illiquid fund, said one fund-of-funds professional. LightSquared is attempting to build a broadband network to bring wireless service to rural areas. But a political firestorm has erupted over the networks potential disruption of GPS devices, with Republicans charging that political donations by Falcone and other LightSquared officials may be influencing the regulatory process. The company is conducting further tests to ensure its network wont interfere with the GPS system. It seems that Falcones wagon is hooked heavily on that one investment, said a hedge fund researcher who follows Harbinger.

Manager Focused on Stock Offerings

Finser International, which manages money for clients in Latin America, is setting up a hedge fund that will invest in newly issued stocks. The planned vehicle, Corfiser Simi Fund, will begin trading this month or next with $1.5 million that Finser chief Andrew Jacobus has been investing since January. Through Sept. 30, the strategy has returned an impressive 35.4%. The Miami firm has been talking to institutional investors about providing initial capital, with the aim of raising $10 million in the next few months. Finser has tapped placement agent LatAm Alternatives of Weston, Fla., to help market the vehicle. The fund will invest in both initial public offerings and secondary stock offerings in an effort to capture price gains that are often seen immediately following a share sale. About 10% of the funds capital will be reserved for shorting.

Need to find the newest funds? Go to The Marketplace section of HFAlert.com and click on Latest Launches.

November 2, 2011

Hedge Fund ALERT

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Hedge Fund ALERT

LATEST LAUNCHES
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Hedge Fund ALERT fund operator Kortright Capital. Stephen Roseberry, formerly with Diamondback Capital, signed on as a financial-stock analyst under Surveyors Allon Hellman. And Jeremy Sussman, who last worked at merchant bank Brean Murray Carret & Co., now is covering energy stocks under Todd Kantor at PioneerPath. The additions come amid efforts by Citadel to expand and possibly combine PioneerPath and Surveyor. Consulting firm Cliffwater has hired Andrew Rudolph, most recently of fund-of-funds manager Robeco-Sage, to head a group that researches long/ short equity funds. Rudolph started in the Marina del Rey, Calif., shops New York office last week, reporting to hedge fund research chief Daniel Stern. He replaces Rick Teisch, who jumped to Lionsgate Capital in June. Rudolph served in a similar role since 2009 at Robeco-Sage, which Robeco Group sold to Arden Asset Management on Oct. 1. Earlier, he headed research at
Sirius Investment. tal about six months ago have joined Millennium Management mirroring

THE GRAPEVINE
... From Page 1

shop founded by former Highbridge Capital managing director Ron Resnick. Tigress was started by former Citigroup executive Cynthia Dibartolo. Chicago investment shop TradeLink Holdings has hired a managing director to lead its marketing and investorrelations efforts. The recruit, James Kavetas, previously worked at Tradeworx, a fund-management shop in Red Bank, N.J. Chicago-based TradeLink invests in a range of products via hedge funds and a proprietary-trading desk. The firm recently changed the name of its asset-management unit to TradeLink Capital from Digilog Capital.
Citadel added four analysts to its PioneerPath Capital and Surveyor Capital units this month. Dimitry Dayen and Xuan Yong joined as energy-stock

similar moves by two other teams that left PioneerPath around the same time. Insurance-company stock specialists Mike Curley and Reed Schwandt joined Millennium last month, working under the name Decade Capital. Their arrival coincided with Millenniums hiring of former PioneerPath industrial-stock trader Matthew Koslow, whose group is called Arsenal Asset Management. And in July, PioneerPath alumnus Michael Taylor brought his healthcare-stockfocused Critical Mass Partners under Millenniums umbrella.
Northern Trust wants to hire a senior

analysts reporting to Surveyor portfolio manager Albert Chu, with Dayen coming over from an associate post at Goldman Sachs and Yong arriving from

Two portfolio managers who broke off from Citadel unit PioneerPath Capi-

consultant for its hedge fund unit, which performs administrative functions for managers and large institutional investors. The recruit would work in the firms Chicago headquarters, with responsibilities including monitoring trade postings and updating prime brokers on managers positions. The Northern Trust group, which goes by the name of Northern Trust Hedge Fund Services, formed via the companys July takeover of Omnium.

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