Recovery landscape brightens for F&C partner
LONDON (Reuters) - Francois Barthelemy has had a tough year. The F&C Partners manager saw assets under management in his hedge funds slump by 80 percent as the financial crisis gripped, and revived performance is yet to bring new inflows.
Speaking to Reuters in his office high above the railway tracks into London's Liverpool Street station, Barthelemy is hopeful for a market recovery which lasts into 2010, but still rails at the knee-jerk response as markets were jolted.
"People panicked and started to leave this space in droves," Barthelemy said.
"This was clearly a mistake. If you had been fully invested with us - you would have lost 20 percent last year, but you would have been up around 12-15 percent this year," he said.
It is no surprise perhaps that the paintings which dot the walls of Barthelemy's office are on the gloomy side -- stark landscapes of bare trees against muted evening skies. More surprising though that he painted them himself.
The 38-year-old already had a degree in art history from the University of Lille to go with his business degree, but started putting theory into practice while working in the equity derivatives business at Morgan Stanley (MS.N) in 1999.
"It's a way of taking time off," he said.
The contraction in the hedge fund industry -- and a fall in assets to about $200 million -- has led F&C Partners to consolidate most of its fund of funds strategies into one main product, the F&C Balanced Alpha Fund.
Hedge funds worldwide are emerging from the worst year on record for the industry. They lost an average of 19 percent last year, according to Credit Suisse Tremont, but in the first eight months of 2009 they are up 11.57 percent.
Over the month to end-August returns from the sterling class of the Balanced fund are flat, while over three months the fund returned a negative 3.11 percent. In the year to date, to end-August, returns were a negative 9.14 percent, according to data from Thomson Reuters fund research firm Lipper.
Barthelemy said that excluding currency effects, the fund has actually gained by about 9 percent in the year-to-date, slightly outperforming other funds in the Lipper Global Hedge/Multi Strategies index.
F&C Partners' other fund, the euro-denominated Select Alpha fund is down 45 percent in the year-to-date, but is up about 14 percent when accounting for cash payouts to investors and currency effects.
Barthelemy likes painting with oils because their forgiving nature allows you to start over, and he is hopeful recent better performance from his funds will prompt the same response from clients looking to cut cash and seek out returns once again.
The Brussels-born Frenchman believes in the long game, and prefers seeking out stories showing fundamental undervaluations against the pursuit of a quick bang for his buck.
"My core philosophy has to be about value. I believe in research and analysis over time," he said.
Barthelemy has been involved in derivatives markets since an internship at Societe Generale led to a job at Flemings in 1995 where he first worked with fellow F&C partner Anthony Culligan.
The pair crossed paths again at Aida Capital after Barthelemy had left MS and then in 2004 set up the F&C Partners business, taking a 40 percent stake while F&C Asset Management's FCAM.L alternatives arm holds the remainder.
He expects his funds to be able to exploit a market rally which lasts at least until 2010. "While a lot of people are skeptical... I suspect it will continue for a while. A crash will probably happen when everyone has put money on the table -- maybe in the first quarter of next year," he said.
He thinks 2010 should be strong for corporates, but that markets have quickly priced this in and will be itching to take profits.
According to F&C's 2008 annual report, Barthelemy and Culligan are trying to get F&C to buy them out of F&C Partners, based on their reading of the Limited Liability Partnership agreement.
"The directors of F&C AIH (the alternative investment arm) do not support this assertion and have initiated legal proceedings to challenge this assertion," F&C said.
Barthelemy declined to comment, however he is clearly careful not to offend the sensitivities of his F&C colleagues.
His paintings include a series of nudes, but these are yet to find a home at F&C HQ.
"I don't bring that kind paintings to the office because it is just not the politically correct thing to do," he said.
(Reporting by Raji Menon; Editing by Joel Dimmock and Sitaraman Shankar)