As President of RWH Advisors, International Chess Grandmaster Ron Henley acts as Special Consultant to Ultra High Net Worth Individuals and Family Offices.  He presented “Learning From A Chess Master: Applying Game Strategy To Systematic Trading” at GAIM International 2010, tracing the hiring of games players to trade in the early 80s to the use of chess theories in the development of algorithmic trading.

In an interview for the Spotlight Series, Ron describes how understanding the tactics and strategies of games like chess, can help in understanding trading….. and how to win.

Terry Tebbe of Business Intelligence Advisors is an elegant woman of a certain age, maybe a school principal or someone who runs a not for profit institution. Fittingly, her appearance belies her experience. Tebbe had a lengthy career in law enforcement as a Special Agent with the US Treasury department and now uses her skills honed in interrogation situations to help investors spot potential deceptive behaviour during interviews. Speaking at GAIM International, Tebbe gave the sophisticated and intelligent audience pause for thought with a number of demonstrations of how one can miss out on indicators of duplicity. Describing herself as Betty Crocker in a skirt, rather than the six foot muscled guy in a trench coat that one might expect given her Secret Service background, Tebbe took her audience through a swift introduction to how to spot verbal and non verbal indicators of mendacity. “Investors have to navigate the grey middle between honesty and intentionally misleading behaviour” she said. Business Intelligence Advisors have been advising pension funds, endowments, family offices and accountancy practices in over 50 countries for nine years, giving an eight hour session that the investor can walk out of instantly equipped with useable detective skills.

In a lively satellite link from Greenwich, Rodger Smith of Greenwich Associates reported the findings of a research project across 2,500 large global institutional investors. The principal findings were that going forward the number of hedge funds would be reduced, regulation would get tighter, there would be greater transparency and changes in the fee structure. Needs, highlighted by the market meltdown, were those old favourites liquidity, transparency and risk.

The global market size under consideration is US $ 25 trillion and in that institutional hedge fund assets amounted to between US $ 425 and US $ 450 billion. Institutional managers had high expectations of returns from hedge fund managers and in the UK more than in Europe, institutional managers were significantly increasing their investment in hedge funds, while Europe had gone slightly cooler. In the US, the institutional allocation to hedge funds has roughly doubled from 2005 to 2009. And looking forward, significant growth is expected in the US. Greenwich also polled the managers on their selection criteria when interviewing hedge fund managers and what came out as number one concern was a clear and consistent investment philosophy while in the UK, managers mostly liked to see evidence of capabilities of professional managment of investments.

Smith emphasised that the competitive edge lies in good service with the best in class service characteristics of a strong internal culture, service objective, communication philosophy and service professionals featuring strongly. Smith pointed out that there is an increased demand for client service and in his opinion most hedge funds are under invested in client servicing. “Investors hold the power and what lies behind the numbers is equally important” he said.

An article by Beverly Chandler.

This year so far has brought a huge variety of drama for the world, not just for the hedge fund industry.  But our focus here is on our industry and recently it has had to deal with debt, volcanic ash, government change, regulatory and tax challenges and unprecedented wild weather.

Despite everything thrown at it, hedge funds appear to be not just surviving but actually getting back to business and thriving.  Recent research showed in-flows to global hedge funds in February at US$ 16.6 bn and March saw US$ 7.6 bn.  Assets in the industry are now at the highest level for 16 months at US$ 1.64 trillion.

Just as that volcanic ash is beginning to settle, so has the dust of the credit crisis begun to settle as people get back to work, albeit with a new awareness of how scarily close to wrecking it all the economic world came.  And with that realisation has come a raft of regulatory and supervisory proposals, designed to stop a banking and financial crisis on that scale happening again.

The European authorities are just about to announce the outcome of a lengthy process which started with what many felt was a knee-jerk reaction to the financial crisis.  The justification of new legislation aimed at curbing the activities of hedge funds and private equity funds was to mitigate systemic risk but as the Alternative Investment Management Association (AIMA) repeatedly claims, there is little evidence that hedge funds caused the crisis.

While proposals were Europe-wide, the greatest concentration of European hedge fund activity is clearly in England and so it was the British hedge fund community that felt increasingly targeted by an almost vindictive regulatory campaign.

The next wave of attack came in proposed tax changes, coming at the hedge fund industry from all sides, the IMF, the EU and within the UK, from the pre-election success Conservatives. Concerned that banks might re-invent themselves as hedge funds in order to avoid paying proposed new taxes on their profits above a certain level, the IMF proposals included hedge funds and alternative funds in new levies that could add an additional 20 per cent tax on the pre-tax profits of certain banks and other financial businesses.

And who would be most affected by any of these changes?  The investors, who according to a new report in the US, are quite likely to be investors in public pension funds.  The report finds that public pension funds by dollar value, are the largest of the institutional allocators of capital to hedge funds.

Attracted to hedge funds by their uncorrelated returns, institutional investors did take fright at the lack of liquidity in hedge fund and fund of funds during the financial crisis.  And that need for liquidity has certainly been a driver for another trend we have seen over this year so far, the growth of so-called hedge fund-lite products in Europe, which show that UCITS funds (European ‘passported’ funds) have taken in US$ 200 bn since they were first allowed to include hedge funds.

Critics of the hedge fund industry - and there are a few, although not many may be reading this -  just have to remember that over 2008 the S&P 500 recorded a 37 per cent fall while hedge funds, on average achieved losses of 19 per cent.  Hedge funds experienced loss but less of a loss than traditional long only investments and while that still happens, they will always prove popular with investors.

About Beverly Chandler

Beverly Chandler has been a specialist hedge fund writer for a number of years, writing for most of the trade press, a number of national newspapers and publishing a couple of books on the subject.  She will be covering the GAIM International 2010 conference, producing a daily digest of the key outtakes from the event, and interviewing speakers & delegates about prevailing industry trends, their views of the future and why GAIM International is the “must attend” conference in the annual calendar.

TOP TIPS from Benjamin Ball Associates

Many hedge funds could be better at pitching to investors.  From our work, helping teams pitch and persuade more effectively, we have identified the five  most common investment pitching mistakes: 

1.     Not understanding the investor.

Too many people go out with a generic presentation and expect it to work for everyone.  You should personalise for each investor.  For example, their attitude to risk, their history of investing and their mandate will all drive how they listen to you.  By  understanding what matters to that investor you can become very persuasive.

2.     Over-reliance on Power Point.

While written materials are important, an investor pitch meeting is all about the people.  Don’t let your document drive the meeting.

3.     Too much focus on you.

A good investment pitch is about the investor, not about you.  Let them be the centre of attention. Make it a dialogue.

4.      Not clear enough.

The most persuasive pitches are the simplest.  If you can’t make it easy for the investor then nobody can.  If your pitch is complex, what will your reporting will be like?

5.      Lack of rehearsal.

Rehearsals are for wimps? Tell that to Tiger Woods, David Beckham, Barack Obama, David Cameron and Richard Branson.

To get a great pitch together is not easy. For most people, a fresh perspective and a systematic approach to the pitch process is what is needed.

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About Benjamin Ball Associates

Benjamin Ball spends his time helping management teams win pitches and commuhnicate effectively in investor presentations.  Recently he has run sessions for senior management at Statoil, Premier Oil, Linklaters, BNP Paribas and Doughty Hanson amongst others.  He has helped them with messaging, presentation performance and pitch winning workshops.

Benjamin will be running the workshop “Honing your business Skills” at GAIM International 2010 on Thursday 17th June at 12.00pm.  Follow Benjamin on Twitter at @BenjaminBallA

on Friday 18th of June at the Exclusive Monaco Golf club

GAIM will be hosting a Networking Golf day at the world-famous Monaco Golf Club on the Friday, after the GAIM International 2010 Conference.   Finish the conference off in perfect style, build on relationships established over the preceding few days and benchmark your golfing abilities against your peers.

There are just 16 places still available at 250 Euros* per person.  The day will consist of a round of golf at the exclusive Monaco Golf Club, including drinks and a prize giving at the end of the round.

Book now to secure your place and relax after a busy week at GAIM International 2010.

Availability is on a first come first served basis, so book now to avoid disappointment.

Contact: Luke Raphael, Head of Business Development

Tel: 0044 207 01 77233 or email: [email protected]

* The fee does not include club or buggy hire.  If required, please arrange directly with the Monaco Golf Club. Tel : +334 93 41 09 11  Fax : +334 93 41 09 55

An Article by Rodger Smith, Managing Director, Greenwich Associates.

The global financial crisis has brought a series of transformational changes to the hedge fund industry.  In a recent survey conducted by Ernst & Young and my firm, Greenwich Associates, hedge fund managers cited a host of developments that are altering the structure of their industry.  Among these changes were consolidation and a reduction in the number of active hedge funds, new and stricter regulations and movement in fee structures. Also near the top of the list were demands for increased levels of transparency — demands that will ultimately require hedge funds interested in competing for institutional assets to ramp up their investments the often-overlooked function of client service.

Despite the industry’s current state of flux, global demand for hedge fund investments is on the rise among institutions. Institutions around the world have invested between $425 billion and $450 billion in hedge funds, a figure driven by the approximately $240 billion invested in hedge funds by institutions in the United States and $80 billion from institutions in continental Europe.  Although institutions in continental Europe have become more skeptical about hedge fund investments since the start of the crisis, this hesitancy has been more than offset by the continued enthusiasm among institutions in the United Kingdom and the United States, which are in the process of increasing hedge fund allocations beyond pre-crisis levels. Read more »