October 11, 2011 / 3:45 PM / in 6 years

Hedge fund ISAM attracts pension cash, grows assets

* Pension funds invest $200 million in ISAM

* Flagship fund flat year-to-date

* Choppy agricultural markets cost fund 800 basis points in 2011

By Tommy Wilkes

LONDON, Oct 11 (Reuters) - ISAM, the hedge fund founded by ex-Man Group chief executive Stanley Fink, has won mandates from two pension funds willing to look beyond a year of flat returns held back in part by bad bets on commodities.

Alexander Lowe, a director at ISAM hired from Man Group earlier this year, said “two very large” institutions recently made a $200 million cash injection, boosting ISAM’s assets to $700 million for the first time.

The money was parked with the Systematic Fund -- the group’s flagship strategy -- which uses algorithms to identify and profit from market trends and like some other “black box” funds has outperformed rivals hit hard by tumbling equity prices.

The Systematic Fund was the product of a 2010 “strategic alliance” formed between ISAM and Larry Hite -- a veteran of systematic trading, although the origins of the strategy date back 30 years.

“This year is actually a sector issue in the sense in certain areas of the market -- particularly in fixed income -- there has been some significant trends pretty much in one direction,” Alex Greyserman, the fund’s chief investment officer, said in an interview at ISAM’s offices.

“In other areas, like argiculturals for example, there has been a lot of choppiness ... this year it has cost us 800 basis points,” said Greyserman, also a visiting professor in mathematical finance at Columbia University, New York.

According to Hedge Fund Research, its HFRI Fund Weighted Composite Index is down 4.74 percent in 2011, with the last quarter the fourth worst on record for hedge fund performance.

ISAM’s “black box” rival, Man Group’s $23.9 billion AHL Fund, is down an estimated 1.5 percent this year, based on Monday’s net asset value per share.

Greyserman, who joined ISAM with Hite in 2010, said his fund was sticking with its agricultural bets for now.

“We feel that agricultural is probably the most de-correlated of the markets we trade both within itself and compared to every other so it makes sense that you should have a reasonable amount of it if you can,” he said.

The fund returned around 17 percent last year, 11 percent in 2009, and 78 percent in 2008.

ISAM, founded in 2008, employs around 30 people in London and New York and also runs the ISAM Fusion fund, a fund of managed accounts fund.

It plans to grow the Systematic Fund to around $5 billion before capacity constraints kick in, Lowe said.

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