SEC-registered fund of hedge funds aims to attract investors with a net worth of $1.5m and at least $100,000 to invest
Ivy Asset Management recently launched a product signaling it has not forgotten the individual investor, despite most of its assets now coming from institutions.
The firm's new product, the Ivy Multi-Strategy Hedge Fund, mirrors a $1.5bn fund of hedge funds already running for four years, but is Ivy's first ever SEC-registered vehicle. Described as an 'all weather' vehicle, it will target investors with a net worth of at least $1.5m and at least $100,000 to invest. Ivy invests in three core strategies for the product; 50% in market neutral hedging; 30% in special situations and the remaining 20% in long/short equity.
Larry Simon, president and chief executive officer of Ivy, who alongside Howard Wohl founded the company in 1984, now sees the possibilities for an individual's asset allocation to include alternatives permanently.
Simon revealed a preference for experienced managers when it comes to long/short strategies.
'These are managers that are longer in the tooth, what I call 'gray-hair-or-no-hair guys'. They have been around, seen difficult markets and have proven they can make money at times like these, or better yet, preserve capital.'
While placing his trust firmly with older managers when it comes to the long/ short equity strategy, in respect of managers more generally Simon believes alternatives are well suited to the younger generation.
'I wouldn't be shocked if by 2010 we are at $1.5tr-$2tr in alternatives. It is a great area for young people to get involved in because of the way the fees are structured. There is very little resistance to entering, and there are opportunities for young people to build their reputations,' he said.
'For example, they come out of a good school, work for a good firm, leave for a hedge fund and get their MBA. By this time they may only be 30-35 years old, so they say to themselves, 'I can attract $20-$30m myself'. If they have a good year and make 30%, they made $9m and 20% of that is $1.8m. Unless you are an athlete or an entertainment star, where else can you have a pot of gold like that?'
The firm also has growing emphasis in Europe. 'Today we have about 110 managers in the portfolio, about 10% are in Europe. As capacity ebbs and flows, the ability to find managers outside your back yard is very important. For the most part, these are in London,' said Simon. Three or four years ago, Ivy had no European managers among its underlying managers.
Ivy's European focus is not just in terms of managers to invest in. While the firm's UK office currently has fewer than 10 staff, who are dedicated to manager research alone, it is presently negotiating for space five times the size of its current operation.
'Unlike other firms, I believe the bigger you get, you have to add people to stay ahead of the curve. You cannot tackle $10bn with the same staff that you have for $7bn,' Simon said.
Coupled with Ivy's global expansion is the need for a differentiated understanding of individual investors' requirements and market trends, as well as researching the most talented managers.
According to Simon, there are differences in demands between US and non-US investors in areas such as liquidity. 'We do not think you establish a good relationship with managers if you are going to have monthly liquidity. If there were clients that wanted capital we could basically do it without affecting the ongoing running of the portfolio.
'In Europe, however, there is more of a need for monthly and daily liquidity and also in Asia. In the US, people are more comfortable with semi-annual or annual liquidity in the first year and quarterly the following. It is a different mindset.'
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