Angelo Gordon moves into hedge-lite strategies
NEW YORK, June 13
NEW YORK, June 13 (Reuters) - Angelo, Gordon & Co., a $15 billion multi-strategy investment group, is stepping up its move into "hedge lite" strategies in a move to appeal to a broader range of investors, officials said on Wednesday.
New York-based Angelo Gordon, known for its expertise in distressed debt, real estate, buyouts and hedge fund strategies, is reaching out to investors with a new "130/30" fund, joining a rush by investment managers in offering such funds.
So called 130/30 strategies allow an investment manager to use a limited amount of leverage and short-selling in moves designed to boost returns in a traditional long-only fund, which don't use those hedge fund techniques. A 130/30 fund would use 30 percent leverage and short an equivalent amount, giving it 100 percent net long exposure.
In recent years, large money managers like State Street Global Advisors, Barclays Global Investors, Goldman Sachs Asset Management and others have been launching 130/30, 120/20 and similar strategies, designed to attract pension fund customers that are piling into hedge funds.
"Large traditional money management firms have been reacting to competitive pressures of hedge funds in rolling out these strategies," said Steve Deutsch, director of separate accounts for Morningstar Inc. (MORN.OQ), the Chicago-based fund research firm. "The size of the universe is rapidly expanding."
In response, major hedge funds such as D.E. Shaw & Co., Renaissance Technologies Corp. and AQR Capital Management have launched their own versions of 130/30 funds.
Most 130/30 funds use quantitative, or mathematical and statistical methods, in choosing long or short stocks in a portfolio.
But the Angelo Gordon fund is banking on its expertise in fundamental research, according to Dana Troxell Jr., chief executive of AG Asset Management, the $2.3 billion affiliate of Angelo Gordon that is managing the fund, which started Feb. 1.
"We are fundamental investors," said Troxell in an interview. "We make decisions on a stock by stock basis."
The move by the 19-year-old Angelo Gordon reflects a trend by large hedge fund groups to diversify product offerings to appeal to a broader range of institutional and high net worth clients.
Angelo Gordon, which traces its roots as a distressed hedge fund investor similar to Cerberus Capital Management, Apollo Management and other industry veterans, moved into the long-only investment world by buying ForstmannLeff a year ago.
ForstmannLeff, founded in 1968, was then controlled by Phillip Bennett, former chief executive of collapsed commodities brokerage Refco Inc. RFXC.DE. Troxell was appointed to manage the unit, and the firm later brought in John Myers, former chief executive and president of GE Asset Management, the General Electric Co. (GE.N) fund management arm.
Morningstar's Deutsch said with the plethora of hedge-lite strategies coming to market, it may take some time to determine which ones generate the best long-term success.
"Investment managers are trying to figure out the formula that will be most appealing," said Deutsch. "Soon we will all be able to compare the competing approaches."