Private Advisors Preps Funds of Private Equity, Hedge Funds

Jan 15 2008 | 1:00am ET

Private Advisors is looking to add to its expertise in the private equity and hedge funds space. The $4 billion private equity and fund of hedge funds shop is putting its finishing touches on a new office in London, where it will be spearheading the development of a global private equity investment strategy.

Lou Moelchert, managing partner, said the Richmond, Va.-based firm is in the process of recruiting a team for its initiative and has already added a couple of institutional marketing staffers.

The p.e. funds of funds is also looking to bolster its track record in its small company buyout fund of funds by investing in experienced private equity managers.  “Given the current credit markets, this is a good time to focus on the smaller end of the market, where deals will get done based on their value, not on cheap credit,” said Moelchert, who declined to provide further details on either funds of p.e. funds strategy 

Lastly, the firm is looking to leverage its experience in the distressed credit market with a new hedge fund offering. "Because we have so much money invested in that space right now with our current distressed fund of hedge funds, we'll evaluate other opportunities to form a finance-oriented fund of hedge funds with low volatility," Moelchert said

However, hedge fund managers who use excessive leverage and black-box strategies need not apply. "We do not like strategies that use excessive leverage, which doesn't mix well with unexpected events in the marketplace. We also don't like highly quantitative strategies based on someone's computer algorithm of what the markets might do most of the time," said Moelchert.

"The thing that you have to look out for are the fat tails that might occur in the marketplace. These can cause a manager to lose a lot of capital quickly even though the VaR model is telling you that the amount you have at risk is much more limited than you think."

Moelchert and Rafael Astruc co-founded Private Advisors in 1997.


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