Warcraft vital for funds’ survival

Visitors to Paris in mid-November were swamped by actors dressed as ghoulish characters from the World of Warcraft online game, stalking the pavements of the world-renowned Champs Elysées shopping thoroughfare. The metaphor is an apt one. One hedge funds insider says current conditions resemble a war, with daily market swings substituting distant mortar fire, while a subdued version of normality continues away from the front. “Most people don’t realise how bad it is out here, particularly in the fund of funds world,” commented our insider, who divides his time between Paris, Geneva, London and the US. Big guns suffering Against this background, hedge fund selectors turned up in numbers for the Paris leg of the Lyxor/FT roadshow. They needed to know which types of strategies would succeed and whether investors will rush to high quality, big name underlying funds. Unfortunately, some of the big names are experiencing the greatest difficulties. Investors cannot withdraw their money due to liquidity restrictions. The result? A ragged portfolio, says PWM’s hedgie friend, with fund selectors left holding unsellable residue and getting deep-fried in the process. There are likely to be many more casualties, said Lyxor’s speakers. Yet, this does not stop some groups promoting their hedge fund capabilities above all else. Witness the current charm offensive from Pierre Servant, top boss at Natixis Global Asset Management. His firm has a multi-boutique structure. Private bankers among you will recognise the routine. The fund salesman brings out a card with seventeen logos on the back, rather than the single one the same guy had five years ago. If the funds he offloaded on you before are doing really badly, please don’t sell them, he will tell you. Just switch to one of their other strategies handled by semi-autonomous product units. Stay visible Currently, Mr Servant is highlighting two of his managers – Alpha Simplex and Gateway - both recently acquired US-based alternatives players. What is important – and something Mr Servant and his French counterparts have got totally right – is continued visibility and dialogue with clients. History tells us this. Today, too many asset managers are going to ground. They cite compliance rules and other nonsense. Yet, they all shout from the rooftops when things are going well, and hide when there are a few problems. Remember Morgan Grenfell in 1995? Owners Deutsche Bank would not make anybody available to discuss major irregularities in the management of three funds. This made new product launches impossible in the medium turn. Hide in the shelters today, and run the risk of being ignored or bypassed once the proverbial shelling stops.