Merriman Curhan Ford Group, an investment bank best known for cleantech research, is aiming to make its mark in the asset management business. The bank in February named Steven Ledger, a hedge fund manager-turned-venture capitalist-turned hedge fund manager, to head Merriman Asset Management and kick-start its modest hedge fund unit.
FINalternatives recently sat down with Ledger, who brought his $25 million hedge fund Focus Fund with him to MCF, at Merriman Curhan’s New York office to talk about his new gig and his plans for the firm’s hedge fund business.
FINalternatives: What are your plans for Merriman Curhan’s asset management business?
Ledger: Being an investment bank and focusing on banking research and institutional sales, asset management was a new business for the firm, though it had some asset management experience among its management and on its board.
We’re pursuing what Jon Merriman, our CEO, calls the Legg Mason model. Legg is a regional investment bank in Baltimore and got into the asset management business as the third leg of the stool that stabilizes the revenue model—research, banking and now asset management.
FINalternatives: Is MCF looking to seed hedge funds?
Ledger: This is not a classic seed business. Instead, it’s an emerging hybrid of that model. In the databases, you can find dozens of small fund managers that are below $50 million and who have great track records within their given niche. If they’re small, two- to five-person shops, and if they don’t scale to manage billions, then the traditional seed community passes them by.
We think of our approach as the “back to the future” model. If you think about how George Soros or Warren Buffet started out, they had small amounts of money from friends and family, and they had to prove themselves as stock pickers and build from there. We believe there are Julian Robertsons out there who are not part of the institutional radar screen. Those are our future partners.
FINalternatives: What does the firm bring to the table to entice these future superstars?
Ledger: We’ll provide all of the business functions that a hedge fund needs so they can focus strictly on investing. The costs of being in the business from an administrative and operational standpoint are substantial, and a $25 million to $50 million hedge fund can’t support it.
We don’t need to own the fund that we’re bringing on board. What we typically do is create a feeder with the Merriman brand and then go out and market that for them.
FINalternatives: Do you have anything in the pipeline?
Ledger: Right now, we’re in the process of launching a cleantech energy hedge fund that will be a long/short equity crossover fund investing in private and public companies. Merriman Curhan has a substantial cleantech investment banking practice. We’re talking to several potential teams to take that product and run with it.
It will be U.S. centric because most of the innovation in cleantech is U.S.-based. We recently hired Tim Newell, who worked in the Clinton administration as environmental czar, and he’s going to be very helpful in helping us raise capital for the cleantech fund.
Hopefully, we’ll have this launched by the end of the summer, and we would like to launch it with at least $20 million to $25 million. There’s a tremendous amount of capital looking for expertise in this area because global warming is no longer a myth propagated by Al Gore and debunked by the Bush administration. It’s real and investors are figuring that out.
FINalternatives: Is this niche, sector-focus fund a prelude of what’s to come?
Ledger: I grew up at Fidelity Investments when it was the most forward-thinking marketing organization in the asset management world. Fidelity created the concept of the sector fund, which was the precursor to exchange-traded funds today. So we’ll be evaluating any strategy that lends itself to a core expertise.
by Hung Tran