The weather was perfect, clear blue skies and unbroken sunshine in what remains one of Europe’s most iconic locations: Monaco. Transfer that across to the overall mood at this year’s Gaim International conference, however, and it was more one of overcast skies with the threat of thunder.
With over 500 of the world’s leading hedge fund managers and investors in attendance it was another first-class event, and a good opportunity for US and European fund managers to compare notes and pick each other’s brains. But the mood was cautious, measured, a realisation that political risk infiltrating today’s global financial markets is testing hedge fund managers’ skills to the maximum.
Jamil Baz, chief investment strategist at GLG Partners, in day one’s opening keynote presentation with Harvard professor Niall Ferguson, set the scene in stark detail by suggesting that the global economic crisis had not even started yet. Leverage, said Baz, was the key to the problem. The fact that G7 countries plus European countries like Spain and Greece had seen their total debt to GDP rise from 380 per cent in 2007 to 420 per cent today, meant that deleveraging down to more acceptable levels of 220 per cent could take 20 years – during which time economic growth would be flat.
Robert Jenkins, external member of the financial policy committee, Bank of England, continued the downbeat theme by adding that short selling bans in Europe were a mere foretaste of what’s to come, and that liquidity would no longer be freely available as banks respond to regulatory demands and increase their tier one capital.
But it certainly wasn’t all doom and gloom. Some of the panel discussions were highly entertaining and upbeat. The session chaired by Gavyn Davies of Fulcrum Asset Management revealed that hedge fund managers welcomed the institutionalisation of the industry. One of the panellists, Nicholas Botta, CFO of activist hedge fund Pershing Square Capital, said that it been a positive development and forced managers to grow up. Jim Dunn, CIO of Wake Forest University, talking in a plenary session on day two, said that right now there is a “golden generation” of hedge fund talent to invest in.
Hedgeweek asked some of the attendees what they thought of the event. Erwin de Kleijn (pictured), Investor Relations Manager of Saemor Capital, enjoyed Nassim Nicholas Taleb’s presentation on “antifragility”. “It’s good to see that the hedge fund industry has an open mind toward original thinkers like Mr Taleb, even though he doesn’t have a financial academic background. I liked the parallel he used between natural evolution and hedge fund investing,” said de Kleijn.
Jane Buchan, CEO of PAAMCO, responded: “The European and American managers have many of the same positions, so in some sense they are identically invested – however, the European managers are much more negative.”
Jim Dunn, referred to above, said that his overall impression was positive and found the conference worthwhile on a number of levels. “The panels were insightful and the perspectives illuminating and divergent from those in the US. The stable of managers was impressive and Victoria (Chatterton, GAIM 2012 conference director) and the conference organizers did a great job to make compelling connections.”
Jeffrey Peskind, the founder and CEO of New York-based Phoenix Investment Adviser LLC, said: “I found the mood pretty cautious and people waiting to see how the events of the European debt crisis would unfold. However, I do think people are still looking for new opportunities that will arise out of this environment. US-based managers are always interested to hear about what European investment managers are looking at, concerned with etc so that was very helpful.”
When asked what his key take-away moment was of the event, Peskind replied: “I spent most of the time meeting with investors as opposed to listening to presentations! It seemed like US managers were a little more popular than I’ve seen in recent times and I think credit strategies like ours are definitely a popular area right now – people think credit is a good place to be so that was encouraging.”
Said Dunn: “I think the highlight may have been the weather but second was the Institutional Panel on the second day. Jane Buchan from PAAMCO was delightful and candid; a combination you rarely see on a dais like GAIM.”