NEW YORK (Reuters) - Hedge funds may be under fire as losses mount and angry investors pull out billions of dollars, but one industry expert says now is the best time to bet on managers striking out on their own.
“This is the absolutely best time to start a hedge fund,” said Anthony Scaramucci, managing partner at SkyBridge Capital, a group that provides seed capital for managers launching funds.
“We are seeing dislocation and creative destruction,” he said at the Reuters Private Equity and Hedge Funds Summit in New York on Monday.
Newcomers are emerging from established hedge funds, where they may have been the No. 2 or No. 3 manager, and from proprietary trading desks gutted by big banks scrambling to slash risk and conserve capital amid the credit crisis.
“JPMorgan, Goldman — they are coming from all of them,” said Scaramucci, whose career also included stints at Goldman Sachs and Neuberger Berman. “I am flooded with talent. I am seeing more interesting people and more interesting ideas than ever before.”
Many investors have been stung by hedge fund losses and a sinking market, and finding new money is a challenge.
But Scaramucci said, “The best moment to start something is when there is no capital. We’re like Diogenes: We have a lantern and we’re looking for contrarian capital.”
The market downturn has created a rare opening for fund managers, he said.
“The big fund managers have been wounded. There has been an evacuation of competition. That has to be good,” he said. “There is distressed pricing in the industry.”
Last year, roughly 800 hedge funds went out of business in the fourth quarter alone. Investors, including pension funds and endowments, pulled $150 billion out of hedge funds last year.
But investors, particularly pension funds with fixed liabilities, say they are not turning their backs on hedge funds completely. The most important thing is to find the best new managers.
While many investors prefer to go with established players who can present long track records, academic research shows newcomers often do better than existing players. This trend, Scaramucci said, will help his firms and the new funds that he helps set up.
In the late 1990s, Scaramucci founded Oscar Capital Management, a hedge fund and investment adviser he sold to Neuberger in 2001.
SkyBridge, which has raised $2 billion since its 2006 launch, currently manages $1.6 billion in assets.
Editing by John Wallace