Wall St migrants are new dotcommers
In 1999, at the height of the dotcom boom, Brandon Stewart and Edric Caballero, two enterprising Orange County teenagers, might have launched an internet company. Instead, in 2003, they set up their own hedge fund.
Living in the US, at 19 both Mr Stewart and Mr Caballero are legally unable to buy a drink, yet they are managing $14m and also planning to take over another hedge fund that would raise total assets to $22m.
Echoing thousands of start-up and would-be hedge fund managers, Mr Stewart says: "We had been trading stocks for a while, and had some potential investors, so we wanted to start on our own."
Hedge funds have been around for a while - the first was launched in 1949 - and the recent boom is not proving to be as brief or frenzied as internet mania was. But in a similar fashion they have quickly become the industry du jour for young aspiring entrepreneurs, mutual fund managers champing at the restrictions of working for a big institution and established Wall Street traders and analysts yearning for a fresh challenge.
Part 2 - How the growing power and influence of hedge funds is changing the financial landscape
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Part 3 - Too much money chasing too few real stars
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Financial journalists, day traders, venture capitalists and even former dotcommers have joined the crowd.
There is no legal definition of a hedge fund - it applies to any pooled fund of money that is not registered to market itself to the public - and there are effectively no barriers to entry, making it easy to set up in business.
Some hedge funds are effectively day traders who might be managing a few thousand dollars of their friends' or family members' money; others are large institutions operating in a way similar to a Wall Street bank, with teams of inhouse economists and huge trading floors.
The ease of entry, the loose and entrepreneurial nature of the industry and the lure of high earnings have helped swell the numbers of hedge funds by 25 per cent to 7,000 in the past two years, and raised concerns about a talent drain in Wall Street and among mutual fund groups.
Eric Mindich, a former chief strategy officer at Goldman Sachs, has become the latest high-profile Wall Street defector to announce plans to set up his own fund, with rumours of a multi-billion dollar fundraising.
Barton Biggs, Morgan Stanley's chief global strategist, last year quit and raised $2bn for his own macro-hedge fund. In what is becoming a common trend, Morgan Stanley decided to back him, providing back-office functions and investing in the fund.
Citigroup this week said it would back Ross Margolies, who runs $3.25bn in hedge fund assets for the financial services group and is quitting to set up his own shop. He will continue to manage Citigroup's money.
Steve Galbraith, Morgan Stanley's US equity strategist, in January left to become a principal at Maverick Capital.
In March, Jeff Larson, fresh from making news for his $17.3m bonus for managing the top-performing Harvard endowment fund, said he was quitting Harvard to set up his own hedge fund firm, including a $2bn market neutral fund.
John Muresianu, a top fund manager at Fidelity, quit two years ago to set up his own fund. Now happily ensconced in an old convent just five minutes from his house in Concorde, Massachusetts, he is able to play the market without worrying about the need to be fully invested at all times (one of the requirements at Fidelity).
Behind them are a small army of analysts, traders and fund managers - often the best performers who are confident of attracting clients - all trying their luck either with their own funds or by joining a fund.
Increasingly, the big hedge funds are hiring strategists and economists in the same way as Wall Street banks. Last month the $12bn Vega fund hired David Mullins, one of the founders of the now-defunct Long Term Capital Management, to be their first chief economist. d4In the UK, some of the top names in the City of London have joined the exodus. Michael Marks and Paul Roy, who used to run the Smith New Court securities business bought by Merrill Lynch in 1995, have set up shop with Stephen Zimmerman, who headed Mercury Asset Management, also now part of the Merrill stable.
Called New Smith, their hedge fund and financial advisory firm has hired some well-known traders and is about to move into swanky new offices in Berkeley Square in London's Mayfair.
The new breed of hedge funds are distancing themselves from the London asset management establishment - literally. Rather than locating in the City or Canary Wharf, to the east, they have opted for some of the best addresses in London's West End - Curzon Street, Jerymn Street, St James's Square. The change of venue underlines the different culture of the boutiques which, along with the potentially high rewards, is part of their appeal.
"The advantage a business like ours has is that we are trying to create something which is entrepreneurial. We can create partners and people can flourish in a very different environment. That is key in a much smaller group like ours," says Mr Zimmerman.
Around the corner from New Smith is a gang of former CSFB traders now running a $5bn fund called Bevan Howard. They are joined by the Rubicon fund, formed by a group of former Salomon Brothers traders, and the London Diversified Fund, set up by some former JP Morgan traders.
In the new quarter, career men can stroll into work from their homes in west London. They can wander around one of London's most exclusive shopping districts and meet their wives for lunch. "You work longer hours, but they are more enjoyable hours. If you have to commute, you're getting up at 5am and if you go out and you're looking at a menu at nine, you think what is the point because all you want to do is go to bed. So now I can wake up later and walk to work."
In the US, asset managers have traditionally been more geographically dispersed than in the UK. However, the flexibility of running one's own business has been just as appealing.
Andy Nahas, who has one of the best performing funds of the past few years, runs it out of Rochester, New York, and frequently works from other places. He outsources as much as he can in order to concentrate on trading.
For top Wall Street figures such as Barton Biggs, a hedge fund gives them the chance to do what they love - analysis and trading - without being weighed down by management issues.
Hedge funds can also be extremely rewarding financially. One hedge fund manager explains: "Imagine two partners who own a $1bn hedge fund and it is up 10 per cent on the year after fees. So you take a 2 per cent management fee on the initial capital and have, say, $20m. You then take your 20 per cent performance cut which would work out at about another $25m. For the year, your hedge fund earns $45m. Take off the costs for running the business and paying staff bonuses, that adds up to say $15m. So the two owners split the rest. That's $15m each."
While hedge funds have been expanding rapidly in the US for some years, in the UK the growth has been more recent - and explosive. There are now more than 500 hedge funds in London, running nearly $120bn. That represents a doubling in the past year, according to International Financial Services London, a financial services think-tank. Worldwide, hedge fund asset growth has easily outpaced other asset classes, rising by 700 per cent in the past decade to around $850bn today.
Some trade in stocks and bonds, others in currencies or futures. But they all share one goal: to make returns - or at least not to lose money - when markets fall as well as when they rise.
Stanley Fink, chief executive of UK hedge fund manager Man group, estimates that hedge funds control just 2 per cent of the total funds invested in markets around the world. So why has their effect been so profound? A big factor is the amount they trade. Ruchi Madan, a Smith Barney analyst, estimates that hedge funds account for about 30 per cent of institutional equity trading commissions.
This means they can move markets. They also encroach on all parts of corporate life: banks want hedge funds as customers because of the amount of business they put through their books; companies with hedge funds as investors can find them hard to handle with their demanding ways and activist tilt; institutions are looking at investing in hedge funds; a whole new industry dedicated to researching, monitoring and packaging hedge funds has sprung up; and the talent they are attracting from Wall Street and the City of London makes them a headache for the big banks and asset managers.
They are attracting recruits from further afield, too. Peter Thiel, who was chief executive of Paypal, the internet payments company, for a few years, is one of several venture capitalists who have launched their own funds. Mr Thiel raised $100m for his Clarium Capital more than a year ago, and has outperformed most other funds in his class.
Some of the old hands have looked on bemused. Dixon Boardman, who founded his Optima fund of funds in 1989, said that in 1998 he questioned the sanity of a KPMG report that the industry would increase to $1,700bn by 2007. At the time, the industry had $170bn in assets. Now, the KPMG projection is no longer looking laughable.
The industry itself is also splintering, as big hedge fund groups in turn find it hard to hold on to young star managers chafing to do their own thing. Chris James, the 34-year-old co-manager of Chris Benton's Andor Capital hedge fund, last week said he was quitting to start his own fund. Mr Benton himself, a former Goldman Sachs analyst, had started Andor in 2001 after leaving another big hedge fund, Pequot Capital.
Hedge funds: the long and the short of their investment style
Hedge funds are a loosely defined group of investment vehicles, trading across the whole range of markets: equities, bonds, commodities, derivatives and so on. Some focus on emerging markets, such as India and Brazil, while others deal only with the US or Europe.
They may differ in focus, but their aim is the same: to make absolute returns. Hedge fund managers take a different approach to the traditional investment funds that dominate world markets. Rather than focusing on absolute returns, the latter measure their progress against a benchmark. A traditional investment manager that sees its FTSE 100 fund lose 10 per cent in a year when the index is down 15 per cent has beaten the benchmark - even though its clients have lost money. By contrast, hedge fund managers try to make returns, no matter what the market conditions are, with a range of trading techniques, many of which are not practised by traditional fund managers.
A typical tactic is taking short positions in markets. In equities, short-selling involves traders selling a stock they do not own - usually after borrowing it from a long-term holder such as an insurance company - in expectation of buying it back more cheaply at a later date, and pocketing the difference.
Another favourite tactic is to leverage the portfolio. By using borrowing to gear their positions in the markets, hedge funds can make better returns if the value of their investments rise. But they can also lose more, which is why funds will often use futures and options to mitigate this downside risk. Hedge funds will also trade their holdings more frequently than traditional investment managers.
They can use such techniques because - unlike traditional funds - they are based in offshore jurisdictions such as the Cayman Islands and Bermuda, which allow them more freedom of manoeuvre.
The earliest hedge funds took bets on individual stocks. But in the 1980s and 1990s the giant "macro" funds began to emerge and focus on macroeconomic trends, placing bets on the directions of different markets. Now there is a large number of hedge fund strategies, practised in just about every market around the world.
对冲基金：下一波风潮？
布兰登?斯图尔特(Brandon Stewart)和埃德里克?卡巴列罗(Edric Caballero)是来自奥兰治县(Orange County)的两位少年。他们非常富有创业精神，若是在1999年的互联网高峰期，他们可能会推出一家互联网公司。而在2003年，他们成立了自己的对冲基金。
斯图尔特先生和卡巴列罗先生均住在美国，都只有19岁。他们还没到能合法购买酒精饮料的年龄。但他们管理的资金却有1400万美元，而且同时正计划收购另一家对冲基金，那将使他们的总资产增至2200万美元。
同数千名刚刚成为、或想要成为对冲基金经理的人所说的一样，斯图尔特先生表示：“我们进行股票交易已有一段时间，有一些潜在投资者，所以我们希望自立门户。”
华尔街精英投身对冲基金
对冲基金的存在已有一段时间，第一只对冲基金是1949年推出的。有证据显示，对冲基金近期的繁荣不象互联网风潮那样短暂或疯狂。但对冲基金正以相同的方式，迅速成为人们竞相涉足的热门行业。这些人包括雄心勃勃的年轻创业者、对大机构的种种限制感到不耐烦的共同基金经理，以及虽功成名就却渴望迎接全新挑战的华尔街交易员和分析师。
财经记者、日间交易员、风险资本家，甚至是原先的网络人(dotcommer)都已加入这个群体。
对冲基金没有法律定义，它适用于任何把资金集中在一起、没有注册、不向公众推销的基金。加之对冲基金事实上没有准入门槛，因此很容易设立。
有些对冲基金可能就是日间交易员管理的朋友或家人的几千美元资金。其它对冲基金则是一些大型机构，以类似华尔街银行的方式运作，内部有经济学家团队和巨大的交易大厅。
该行业进入简单，具有宽松、创业的特性，加之高收益带来的诱惑，已导致对冲基金的数量近两年来猛增25%，达7000家，并引发了华尔街和共同基金集团对人才流失的担忧。
前高盛(Goldman Sachs)首席战略官埃里克?明迪奇(Eric Mindich)已成为最新一个“背叛”华尔街的著名人物。他宣布了设立自己基金的计划。有传言说，该基金将募集数十亿美元资金。
摩根士丹利(Morgan Stanley)的首席全球战略师巴顿?比格斯(Barton Biggs)去年离职，成立了自己的宏观对冲基金，并为该基金筹集20亿美元。摩根士丹利决定支持他，为他提供后台功能，并投资于该基金。这种支持正成为一种普遍趋势。
花旗集团(Citigroup)的罗斯?马戈利斯(Ross Margolies)为这家金融服务集团管理着32.5亿美元的对冲基金资产，他也将辞职并成立自己的公司。花旗集团本周表示，对马戈利斯表示支持，而且他将继续管理花旗集团的资金。
摩根士丹利的美国股票策略师史蒂夫?加尔布雷思(Steve Galbraith)今年1月离职，成为Maverick Capital的一位主合伙人。
今年3月，杰夫?拉尔森(Jeff Larson)表示，他将辞去哈佛的工作，设立自己的对冲基金公司，包括一家20亿美元的市场中性基金。当时他负责管理业绩一流的哈佛捐赠基金，并刚刚因此得到1730万美元奖金，成为新闻人物。
富达(Fidelity)的一位顶尖基金经理约翰?穆雷西亚努(John Muresianu)两年前辞职，创立了自己的基金。现在，他舒舒服服地安坐在一座古老的修道院中，距离他在马萨诸塞州康考德(Concorde)的家只有五分钟路程。他现在可以在市场上随意进出，无须担心任何时候都必须投入全部资金的规定(这是富达的规定之一)。
在他们的背后，有一个由分析师、交易员和基金经理组成的小型团队，这些人要么自己创立基金，要么加入一个基金来碰运气。他们往往是操作业绩最佳的那批人，对吸引客户充满信心。
大型对冲基金正和华尔街银行一样，越来越多地雇佣策略师和经济学家。上月，规模达120亿美元的Vega基金聘请戴维?马林斯(David Mullins)担任第一任首席经济学家。此人是现已破产的长期资本管理公司(Long Term Capital Management)的创始人之一。
在英国，伦敦金融城中一些大名鼎鼎的人物也加入了这场迁徙运动。迈克尔?马克斯(Michael Marks)与保罗?罗伊(Paul Roy)曾负责运作Smith New Court证券业务，自该业务1995年被美林(Merrill Lynch)收购后，他们现在与史蒂芬?齐默尔曼(Stephen Zimmerman)一起，自立门户。齐默尔曼此前掌管的水星资产管理公司(Mercury Asset Management)现在也并入了美林。
他们的对冲基金与金融咨询公司名为“新史密斯”(New Smith)，现已聘用了一些知名交易员，并即将搬入伯克莱广场(Berkeley Square)闪亮的新办公室中。伯克莱广场位于伦敦高档住宅区Mayfair。
对冲基金的诱人之处
新的对冲基金一族正在地理上拉开与伦敦老牌资产管理公司的距离。他们往往选址在伦敦西区一些最好的地段，如Curzon大街、Jerymn大街以及圣詹姆斯(St James)广场，而不是东部的金融城或金丝雀码头(Canary Wharf)地区。办公地点的变化凸显出这些小公司不同的文化。这种文化与潜在的高回报一起，构成了它们吸引力的一部分。
齐默尔曼先生说：“我们这样的公司所具有的优势是，我们会设法营造出一些具有创业性的东西。我们可以设立合伙人的位置，人们能在大不相同的环境中得到充分发展。在我们这样较小的团队中，这一点非常重要。”
在新史密斯公司旁的拐角处，是一帮瑞士信贷第一波士顿(CSFB)的前交易员运作的基金公司。该基金规模达50亿美元，名为“贝文?霍华德”(Bevan Howard)。这里还有所罗门兄弟(Salomon Brothers)的前交易员组建的Rubicon基金，以及一些JP摩根(JP Morgan)前交易员创立的伦敦多样化基金(London Diversified Fund)。
在这片新区域中，对冲基金业人士能从他们在伦敦西部的家中散着步来上班。他们能在伦敦最高级的购物区逛街，与他们的妻子共进午餐。“你工作时间虽然长了，但工作得更愉快了。如果你每天上班必须坐车来回，就得在早上5点起床，而如果你有事外出，要到晚上9点才能吃上晚饭。你想，这有什么意思？因为你唯一想做的就是上床睡觉。所以现在我可以晚一点醒来，然后步行去上班。”
在美国，基金经理们在地域分布上向来比英国基金经理要分散。但对美国基金经理来说，自己做生意所具有的灵活性同样很有吸引力。
安迪?纳哈斯(Andy Nahas)在纽约罗彻斯特(Rochester)外围经营着一只基金，并经常在其他不同的地方进行运作。这只基金是过去几年中表现最好的基金之一。为了集中精力做好交易，他尽可能多地将相关事务外包出去。
对巴顿?比格斯(Barton Biggs)这样的华尔街顶级人物而言，对冲基金给了他们一个机会，可以去做自己喜欢做的事，即分析和交易，而不用过于操心管理事务。
对冲基金也能提供极高的经济回报。一位对冲基金经理解释说：“想象一下，两位合伙人拥有一个10亿美元的对冲基金，扣除费用后全年增长10%。那么你按本金拿走2%的管理费，就有，比如说2000万美元。然后，你拿走属于你的20%业绩提成，大约又能获得2500万美元。你的对冲基金全年收益4500万美元，假如扣除1500万美元的运营成本和员工奖金，那么剩余收入经两个合伙人平分后，每人可得1500万美元。”
