Treesdale Launches Fund, Preps Portable Alpha Product

Jun 2 2006 | 8:04pm ET

Alternative investment manager Treesdale Partners, which specializes in fixed-income, has recently launched a fund-of-hedge funds and is preparing to unveil a commingled portable alpha vehicle later this summer.

The Treesdale Special Opportunities Fund launched in April with $35 million in assets under management and has since taken in an additional $26 million. According to Dennis Rhee, managing partner, the new fund differs from the firm's flagship fund in the number of underlying managers and its approach to liquidity.

"We are shooting for higher returns by going down on the liquidity scale and increasing our concentration," Rhee said. The firm's new fund, an offshore vehicle, has 10 underlying managers, while the firm's first fund —a diversified portfolio of hedge funds focused exclusively on relative value arbitrage strategies in the fixed-income sector —invests with around 25 managers.

Rhee said the next product in the works is a portable alpha fund that will provide a commingled vehicle for both alpha and beta.

"It will be one product where the investor chooses the beta — such as the Lehman Brothers Aggregate (Bond Index) —and then invests in Treesdale," he said.

Rhee said that portable alpha —which is often used as a fixed-income substitute in a portfolio —is often misunderstood.

"A lot of these advisors are saying that you can put any alpha on top of any beta and it doesn't matter where the alpha comes from, but they are incorrect," he said.

He explained that many consultants recommend that their clients invest in multi-strategy fund-of-funds as a source of alpha, but that these multi-strategy funds have a lot of equity exposure, and the institutional investors are already exposed to a lot of equity in the equity beta portion of their portfolio.

"If the stock market falls apart, then the equity part of the portfolio falls apart," he said. In other words, "when a fixed-income portfolio is supposed to save the day, it doesn't."

Both the Treesdale Special Opportunities Fund and the commingled portable alpha vehicle —which already has commitments of more than $30 million —are aimed at institutional investors, such as pension funds and endowments.

Treesdale is based in New York and has approximately $800 million in assets under management.

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