New York-based hedge fund allocator Absolute Fund Advisors is currently invested in 18 new and emerging managers and General Partner Jason Konior says that total could reach 25 by year’s end.
Konior who, prior to launching AFA in 2006, owned and ran the retail division of KSH, a $1.2 billion bank, told FINalternatives AFA makes two types of allocations to hedge funds. The initial allocation, he says, is made on a first-loss basis.
“We provide 9-to-1 matching capital to them,” says Konior. “So, if they have $1 million, we provide $9 [million] and they run $10 [million]. They run that $10 million on our platform in a first-loss position, meaning all losses are absorbed by their million. Once the managers have proven themselves on the platform and we’re comfortable with their performance, obviously they’re making money, but more importantly, from a risk perspective, when we’re more comfortable with the strategy, [and] we will go ahead with a more traditional allocation…”
AFA, which currently runs about $220 million, has made two allocations this September—to Quidnet Capital, a global macro strategy, and Rockmore Capital, an equity long/short event-driven fund. Konior says AFA is being approached by many funds, and it has a marketing team that “goes after funds that fit certain criteria.”
The firm likes “liquid, listed equities, options, some futures—to the extent of the major indexes” and low-volatility. Konior says they focus on emerging managers because their allocation model appeals to emerging managers:
“The people who are most attracted to this model are ones that are seeking growth in AUM and institutional exposure,” he says. “A billion dollar fund is not going to need the AUM boost that we’re offering.”
In addition to the “AUM boost,” AFA offers managers institutional exposure via its platform and, provided they prove themselves through the first-loss model, Konior says AFA is quick to allocate traditional assets to their best managers.
While the firm will allocate to managers world-wide, Konior says it currently focusing on Europe and Asia.
“We’re always looking for talent,” he says.