The successful hedge funds of funds of the future will be those that are “a little more alpha-centric than beta-centric,” says SkyBridge Capital managing partner and CIO Ray Nolte.
Nolte, whose firm specializes in funds of funds (or commingled multi-manager vehicles) as well as hedge fund seeding, hedge fund advisory services and separate accounts, says the days of investing in a fund of funds simply to access big managers are over.
“The investor base is more focused on performance than it was some years ago, when the focus was, ‘How do I get access to the big names?’ Nolte told FINalternatives in a recent phone interview, “Now, investors are interested in specific performance. They want to know what value funds of funds are adding.”
Nolte sees a “bifurcation” developing in the fund of funds space: traditional FoFs, he says, are essentially “beta trades.” They tend to track hedge fund indices and are “broadly diversified and take small- to medium-sized positions.” The new breed of fund of funds, he says, is “alpha-generating.” They tend to hold more concentrated positions and shift allocations more than the beta funds.
Nolte says funds of funds generally are not attracting as much investment as are single-manager funds, but the capital that is flowing to them tends to go to “those that are a little more alpha-centric than beta-centric.”
SkyBridge, he says, remains very focused on generating performance and has made a number of hires and inked deals with additional distribution partners on the strength of the outlook for its co-mingled multi-manager products.
In another of its business lines, the firm is looking at “a few variations on the seeding theme,” mulling “one or two seeding transactions that are a bit different” from the traditional model.
SkyBridge, headed by Anthony Scaramucci and with assets under management or advisement (as of February 29, 2012) about $6.2 billion, is also in the process of building its “European footprint,” says Nolte, and has opened an office in Zurich. The Swiss city was chosen in part to accommodate the firm’s new CEO of international operations, Max von Bismarck, who was already located there, and in part because it is “a good location for us to be able to reach many different channels.”
Nolte says that while Europe will undoubtedly “flat line for a while from an economic perspective,” from a hedge fund perspective, “investors are still sitting largely on the sidelines, but slowly starting to re-emerge and look for opportunities.” SkyBridge sees this re-emergence of European investors “taking a look at the space as an opportunity. Now is the time to be planting seeds, so that, in the medium or longer term, when things improve, we will be well-positioned to take advantage of that.”
The future of Europe is just one of the many topics that will be up for discussion during the firm’s annual industry conference—the SkyBridge Alternatives Conference (SALT)—happening this week in Las Vegas.
This year’s iteration, running from May 8-11, brings together over 1800 thought leaders, pulbic policy officials, business professionals and investors from over 26 countries to debate macro-economic trends, geo-political events and alternative investment opportunities.
Keynote speakers this year include former Alaska Governor Sarah Palin, former U.S. Vice President Al Gore, former U.S. Secretary of Defense Robert Gates, Third Point Capital CEO Daniel Loeb, Elliott Management founder Paul Singer and Harbinger Capital CEO Philip Falcone.