Amsterdam-based independent hedge fund specialist Theta Capital Management is celebrating its 15th anniversary this month.
Theta Capital welcomed its first investors on 1 September 2001 and has always been exclusively focused on investing in hedge funds on behalf of its clients.
Founder Tijo van Marle says: “We started with a capital base of around EUR20 million from friends and family. Investors had their own dedicated portfolio of hedge funds. And September 2001 turned out to be an interesting month to start. Equity markets were down 10 per cent while we and our clients lost less than 1 per cent. It was an immediate validation of our investment approach.”
Theta Capital now manages mandates for a number of the largest Dutch family offices and foundations as well as professional individual investors. The manager sees a renewed interest in hedge funds now that the upside perspective for bond and equity markets has become grimmer.
Besides the individual mandates for large professional investors, Theta Capital has since 2010 managed the Legends Fund. This is an exchange-listed investment fund, through which investors can participate in the world of hedge funds. Legends Fund invests in a selection of 10 to 15 of well-renowned hedge fund managers from around the world, most of whom are closed to new investors. Through its exchange listing, the fund is liquid and requires no minimum investment size.
Van Marle says: “In this business it is about knowledge and access. Specialised knowledge is required to select the right funds, but you also need the contacts to get access to the best managers. The fact that we have been focusing on this industry day in day out for 15 years has resulted in close relationships with most of the leading hedge funds and many of the leading hedge fund investors out there.”
Over the 15 year history, this recent period may be the period in which hedge funds have received most criticism.
Theta Capital director Ruud Smets says: “A lot of the newer investors have mixed or even outright negative experiences investing in hedge funds. This is in the first place a result of investing in the wrong funds. After the successful years early in the millennium the industry has seen enormous growth with countless fund launches, many of which were of lesser quality. Hedge funds are a talent pool and top talent simply cannot not be copied, so no wonder that there are many disappointments.
“The second problem is more self-inflicted: investors tend to get in and out of hedge funds at the wrong times. While this investor behaviour is observable across investment categories, it plays an even greater role in the case of hedge fund investing, which is also due to the compensation structure of hedge funds with their performance fees and high watermarks. Investor often don’t see through the complex strategies well enough, leaving recent performance as the main factor in their investment decision. This includes parting with a fund when it goes through a more difficult period.
“This performance chasing behaviour is disastrous for your longer term investment results. It shows that investing in hedge funds is a true specialism. Our job is to get to the bottom of the strategies and funds which then allows us to subscribe to and redeem from funds on more qualitative grounds, the timing of which is often contrarian to the behaviour of most of the investors.”
