21 September 2005
Macquarie Bank is putting its financial muscle behind the next generation of Australian hedge fund managers with an incubator program.
Macquarie, already active in hedge funds through fund-of-fund offerings, has struck agreements with two local managers through which Macquarie takes a minority stake in each and provides infrastructure, marketing and other support in return, allowing the managers to concentrate on what they're good at: managing money.
The two managers are Argus Capital Management, a diversified global futures trader, and Caravel Asset Management, a quantitative global equity markets manager.
"Macquarie recognises the importance of fostering and developing the next generation of Australian hedge fund managers," says Jonathan Hall, Division Director in Macquarie's Equity Markets Group. "We're looking for innovative managers with a distinctive edge amongst the region's emerging talent, with a view to providing seed and working capital and support in areas like marketing, client service, strategy and administrative efficiency, in exchange for a share of the management company."
"Identifying the talent early in the lifecycle of a hedge fund manager is a key to our strategy," Mr Hall said. "It also increases the chance that successful trading strategies will not fall foul of the multitude of operational or business issues that new managers face."
Mr Hall also said that making agreements with nascent external fund managers will help to ensure Macquarie's fund of hedge fund business had sufficient ongoing capacity to offer institutional and retail investors a broad range of innovative products.
Macquarie's Incubator program, run within its Equity Markets Group, complements the Bank's existing fund of hedge fund business, the backbone of which is its Equinox series of offerings, and the single strategy hedge fund business offered via Macquarie Newton.
"Macquarie has considerable experience in hedge fund structuring and marketing and we're aiming to provide our external managers with the flow-on benefits of that experience. The incubator program was really the one missing part of our hedge fund suite and is a natural progression for our business," Mr Hall said.
Argus Capital Management, run by Steven Biggs, is a diversified global futures trader with a nine-year track record. Its trading strategies are complemented by a highly reactive, systematic capital allocation method that allows the program to shift capital towards better performing strategies and markets. It operates three strategies that trade a total of more than 70 futures markets. Argus has produced a compound annual return of 20.9% since October 1996, and is up almost 20% this calendar year to date.
"Argus is really distinguishing itself from the crowd this year." Mr Hall said. "Many other systematic traders are struggling for consistency at a time when markets aren't being kind to their core strategy. The brilliance of Argus is their ability to adapt to different conditions for the various markets they trade - they don't rely on a fixed allocation methodology to their three core strategies, so capital is channeled towards the more recently profitable areas. This is of key importance for a diversified futures trader in generating attractive returns across market cycles, and Argus does it very well," Mr. Hall said.
"This joint venture provides us a unique opportunity to continue our operations in trading and research and tap into the skills of a more global partner while we transform our business into an internationally recognised fund manager," said Mr Biggs. "It also gives Macquarie a share of a manager with almost nine years of attractive track record."
Macquarie has also joined forces with Caravel Asset Management, a Brisbane-based firm led by Mathew Jeremy. Caravel uses a quantitative investment process to capture differences in returns between the major global equity markets. Caravel's process rests on fundamentally based foundations and encapsulates Mathew Jeremy's experience over more than 20 years in financial markets and as an institutional asset manager.
"We have been very fortunate to find a manager with the institutional asset management pedigree of Mathew Jeremy," Mr. Hall said. "Mathew is well known and respected both here and overseas. His investment process is highly innovative in the hedge fund world - its disciplined approach combines fundamental and market-based factors to construct a target portfolio each month. The depth of Caravel's process, combined with its clear focus on consistency of returns, will be very appealing to institutional hedge fund allocators. It's unique."
"Macquarie has recognised that our strategy presents significant diversification benefits against many equity long/short and futures trading managers," Mr Jeremy said. "Their support gives us the opportunity to develop our business in ways that wouldn't otherwise be possible."
Both incubated managers have received their financial services licences from the Australian Securities and Investments Commission. Each manager currently offers institutional investors access to their trading program via managed accounts, while offshore fund structures will be established in the coming months.
For more Information, contact:
Macquarie Bank Limited
Tel: (612) 8232 4102
Mobile: (614) 1069 9532
Equity Markets Group
Tel: (612) 8232 3327