Q&A: BarclayHedge's Numbers Game

Feb 8 2008 | 2:00am ET

Sol Waksman, founder and president of BarclayHedge, has been at the forefront of the alternatives industry for more than two decades.  His database of more than 7,000 hedge funds and commodity trading advisers is widely used by money managers and investors alike.   

FINalternatives recently caught up with Waksman and spoke with him about the changing nature of the hedge fund data business and how hedge funds are really doing this year.

FINalternatives: How did you get involved in the data collection business?

Waksman: I used to trade futures and options back in the early 1980s I did okay for a while—nothing very good and nothing very bad. But at one point I went through a prolonged losing period…I was very unsophisticated then and I’m not all that sophisticated now.

I took time off and started researching what was out there. I saw that there were people who were making money each year trading in the futures markets. [These markets] were regulated and you could get disclosure documents in a prescribed format where you could see monthly returns. This is what got me started in the [data] business and I launched the firm based on this information in 1985.

FINalternatives: How receptive were CTAs to your business and how has the scope of your business changed over the years? 

Waksman: People in the managed future space were very receptive from day one. It was a new industry and you could go into a room for a cocktail party and there would be 50-60 people there, and that was most of the industry.

We thought that once we got to 100 CTAs on our database that ours would be the world’s largest. Now, 100 managers is nothing and we’re updating more than 100 each day. So it was a different scale.

FINalternatives: What’s been the biggest change for your business since inception and what do you hang your hat on?

Waskman: The biggest change has been the expansion of data fields that we collect. Initially, when people started investing in hedge funds, the amount of due diligence carried out by investors was absolutely minimal. As time has gone by, we’ve seen blowups and frauds and each time one of these things happens, investors are updating their due diligence procedures to prevent making this type of mistake. As those procedures are updated, the types of information they ask for increases.

What we’ve always focused on has been accuracy, comprehensiveness and timeliness. For us, those are the three most important things. When we ship out our data at month end, on average, in excess of 92% of all the funds on our system are up to date. That, from everything I’ve seen, is quite a high number.

FINalternatives: Quant hedge funds and the subprime crisis dominated the news last year and made for some really juicy headlines. What are your thoughts on what transpired in 2007 and how are managers performing so far in 2008?

Waksman: Last year, the surprising low returns were just among a handful of managers, and once you got past that, if you looked at the broader averages, there wasn’t anything remarkable about 2007. This year, we’re seeing problems across a much bigger spectrum of equity strategies and there was much more money lost in January than in total of the three worst months in 2007.

FINalternatives: You recently changed the name of your firm from The Barclay Group to BarclayHedge. What was the motivation behind that initiative?

Waksman: Two things: it better reflects what we do and it reduces any potential confusion between us and the bank. In fact, our logo says “BarclayHedge” and underneath it says, “An Iowa Corporation,” so if someone’s still confused after that, then we can’t take any responsibilities.

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