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Love at Ikos Hedge Fund Sours as Ambrosiadou Fights With Coward

Elena Ambrosiadou, co-founder and CEO of Ikos Partners
Elena Ambrosiadou, co-founder and chief executive officer of Ikos Partners, poses for a photograph at the Bloomberg Link Hedge Funds 2011 conference at the Museum of London on March 17, 2011. Photographer: Chris Ratcliffe/Bloomberg

On a warm evening in June at the Monaco Yacht Club, Elena Ambrosiadou stands in front of 200 guests assembled to celebrate the 20th anniversary of Ikos Asset Management Ltd., her $2.5 billion hedge fund. Wearing a beige skirt and top and snakeskin heels, with her long hair dyed platinum blond, Ambrosiadou is flanked by big plasma screens showing her 289-foot Maltese Falcon, the largest sailing yacht in the world, gliding past the Statue of Liberty.

Ambrosiadou tells the crowd she hopes the boat, which she bought for $120 million in 2009, does well in a July sailing competition, the Transatlantic Race, Bloomberg Markets magazine reports in its September issue. “Unfortunately, I won’t be able to join the race because of my work commitments,” she tells the guests as they eat blinis with caviar and sip Moet & Chandon champagne.

Missing the 3,000-mile (4,828-kilometer) odyssey from Newport, Rhode Island, to England’s Lizard Point is one small sign that Ambrosiadou, 52, is under siege. Ranked the highest-paid woman in Britain by London’s Sunday Times before moving Ikos to Cyprus in 2005, Ambrosiadou is now fighting over the firm with the man who helped build it: her estranged husband and former business partner, Martin Coward.

As quantitative analysts -- or quants -- Ambrosiadou, a Greek-born engineer, and Coward, a British mathematician, belong to one of the most elite cadres in finance. Their very public quarrel has rocked the normally secretive world of hedge funds at a time when the industry on both sides of the Atlantic is under pressure over falling returns from the misjudging of commodities markets and wrong-way bets on the euro.

Quant Power Couple

“The whole story is very unusual for the hedge-fund - industry,” says Jerome Lussan, founder of London-based Laven Partners LLP, which examines hedge funds for investors. “You rarely have a team of founders who are married. They were well regarded as a kind of golden couple.”

Almost 30 years after meeting at the University of Cambridge in England, Ambrosiadou, chief executive officer of Ikos, and Coward, who was chairman and chief investment officer until he left in 2009 to set up his own company, have gone from a quant power couple to a bickering duo fighting an expensive and prolonged legal battle.

They’ve lodged about 40 lawsuits against each other during the past two years in at least four countries, as well as pending divorce actions to end their 27-year marriage. Ikos says Coward has no ownership stake in the firm and no right to its profits, according to a company statement. Coward has said he owns the software that drives Ikos investment decisions and is claiming a stake in the firm.

Hallmarks of a Thriller

Relations are so fraught between Coward and Ambrosiadou that they don’t even agree on whether it was their personal or business union that frayed first. Coward, 53, has said their relationship broke down after Ambrosiadou, without consulting him, fired the 14-member Ikos research team in December 2008 while he was skiing in the Alps. Ambrosiadou has said in legal filings that the marriage fell apart much earlier, in 2004.

With allegations flying back and forth, the fight over Ikos has the hallmarks of a thriller: roving bands of private investigators, electronic skullduggery and twin brothers who allegedly copied Ikos computer files onto an iPod.

Coward claims that Ambrosiadou hired Kroll Associates to bug him at their medieval home in southeast England and sent spies to track him at clubs and cafes in St. Tropez, Cyprus and Monaco, where the surveillance was codenamed Operation Apollo.

Lurid Allegations

Ikos contends that Coward illegally copied proprietary software. It says it took legitimate actions to safeguard the firm’s technology from attempts by Coward and former employees to run off with it. Coward denies any wrong-doing, according to a May 24 statement.

“I’ve got an organization to protect,” Ambrosiadou says, sitting behind a large desk in her cramped, modern office in Monaco, amid the collected works of Plato and photos of herself with Prince Albert, Middle Eastern investors and her 14-year-old son. “I have to go through the court process and let the judges decide.”

Before Ikos became embroiled in lurid allegations, it was known for its high returns. From 2007 to 2009, Ikos’s flagship FX Fund produced annualized returns of 11.5 percent. Since Coward left and the legal battle began, the FX Fund has surged 31 percent and Ikos’s Futures Fund has soared 28 percent on an annualized basis through March 2011.

Fourth-Best Performer

Since the beginning of 2010, Ikos has boosted its assets under management by more than 50 percent to about $2.5 billion, and wooed sovereign-wealth funds that now make up more than half of its assets under management, including the Abu Dhabi Investment Authority.

The FX Fund, which invests in currencies, gained 26 percent last year. The FX Fund was up nearly 10 percent through the end of June, beating Bloomberg’s Index for Managed Futures Funds and Commodity Trading Advisers, which was down almost 4 percent. The FX Fund was the fourth-best performer among large hedge funds last year, according to a Bloomberg Markets ranking (“Dr. Brownstein’s Winning Formula,” February 2011).

Founded in 1991 and named after the Greek word for home, Ikos was one of the first quant investment firms. It makes money by designing mathematical models that use market data to forecast prices of securities and futures. With its reliance on its automated computer programs, nicknamed Wendy, Fox and Badger, Ikos is what’s known as a systematic managed-futures firm, replacing human judgment with quantitative analysis.

Turn Ugly

Driven by mathematicians and engineers, quant investing during the past 15 years has helped fuel the global boom in hedge funds that, even after the shakeout of the past three years, still manage $1.8 trillion.

Assets of systematic managed-futures funds, which trade futures contracts on currencies, commodities and interest rates, have surged to $238.6 billion in the first quarter of this year from $22.9 billion in 1999, according to Fairfield, Iowa-based BarclayHedge Ltd.

With hedge funds such as Ikos so dependent on intellectual property, things can turn ugly when there’s a dispute over who controls the computer models--and uglier still when a marriage breakup and personal animosities are added to the mix.

In a lawsuit in the U.K. High Court last year, Coward said he was the one who had devised the algorithms at the heart of the firm’s 20-year success. Then, in early May, Coward withdrew his suit without explanation. His legal flip-flop cost him more than 2 million pounds ($3.2 million), Ikos said in a statement.

Take Control

Ikos contends that Coward and former Ikos employees tried to take control of the company and misappropriate its technology even before he left, according to a statement by the company on May 24.

Coward downloaded software in November 2009 using a laptop and external hard drive, according to a lawsuit Ikos filed in the U.K. High Court against Hogan Lovells International LLP, Coward’s law firm. He set up a company in Cyprus called Marmidons Ltd. and is in the process of developing new trading software, the lawsuit says.

Coward declined to be interviewed for this story, saying he’s under a court order not to comment on Ambrosiadou or the firm. “It is wholly misconceived,” Hogan Lovells spokeswoman Karen Snell says of the lawsuit.

Interviewed in her Monaco office, Ambrosiadou comes across as cerebral. She gives a five-minute lesson on the etymology of the word Ikos, which in ancient Greece was the name of the treasury on the island of Delos.

Maltese Falcon

Displaying an engineer’s fascination with high technology, she becomes particularly animated when talking about the computer system that allows a single person to sail the Maltese Falcon, which she auctioned off for two weeklong holidays to raise £930,000 for charity in June.

The rest of the time--her eyes often fixed on the table in front of her, occasionally twisting a diamond ring on her middle finger--she speaks softly about her efforts to protect the firm while declining to talk about current litigation.

“We have built an institutional infrastructure here,” Ambrosiadou says. “There were many other people at Ikos who I recruited to work on technical issues, operations, databases. I worked with all of those people, not just with Martin, in order to develop the infrastructure.”

The man who sold her the Maltese Falcon says Ambrosiadou is determined. “She’s not going to let Martin Coward screw up Ikos and her life,” says Tom Perkins, a partner at Kleiner Perkins Caufield & Byers, a Menlo Park, California-based venture-capital firm.

‘Faster, Faster!’

Perkins sailed across the Atlantic with her in rough weather in 2009. “The boat was rocking around, but she just loved it and she was up on the bridge, full of questions. The captain later told me that she kept saying, ‘Faster, faster!’”

The split with her husband and fight over the business have taken an emotional toll on Ambrosiadou. She takes out a poem she wrote earlier this year: Parallel lives binding chaos Beauty and pain Complexity with brilliance Love and rejection. The poem ends with “She is the weaver of her dreams.”

Ambrosiadou has been spinning her own dreams since she was a child growing up in Thessaloniki, Greece. Her father, who ran his own trading business, wanted his daughter, the elder of two girls, to own and manage her own company.

‘My Own Business’

“To him, if I wanted to be really successful, I had to run my own business,” she says. Ambrosiadou, who excelled at math and science in high school, attended the University of Leeds in England, where she earned a Bachelor of Science in chemical engineering. She went on to Cambridge, where she planned to do a Ph.D. in control engineering, the discipline of applying mathematical models to design mechanical and electrical systems.

It was at Cambridge that she met Coward, then a doctoral student also studying control engineering. Coward, whose -father was an engineer, grew up in Birmingham, England. He and Ambrosiadou married in 1983. After leaving the university, Coward joined Principia Mechanica, a consulting group then based in Cambridge, where he used his statistical skills to analyze earthquakes.

Deciding against pursuing her degree at Cambridge, Ambrosiadou got a master’s in technology and development at Imperial College London. She went to work for BP Plc, where she became a manager in the company’s chemical business after getting an MBA at Bedfordshire, England-based Cranfield University School of Management in 1988.

‘Heavy-Duty Quant’

While Ambrosiadou was at BP, Coward was headhunted in 1986 by Goldman Sachs Group Inc., which was scouring research labs for quants. “Coward was an extremely bright guy, very personable,” says Ron DiRusso, who worked with Coward at Goldman Sachs in the late 1980s and knew the couple. “Martin was a heavy-duty quant,” says DiRusso, who is now a portfolio manager at FX Concepts LLC in New York. “He was more of a thinker. Elena was the business-minded person.”

It was about this time that Ambrosiadou made her first foray into asset management, investing $500,000 of her father’s money in mutual funds.

In 1989, Coward took a job at Investcorp, a Manama, Bahrain-based investment bank that at the time focused mostly on buyouts. Ambrosiadou quit BP to work in her -father’s business and then joined her husband in Bahrain in 1990.

‘I Can Do This’

She was also researching business ideas, and she concluded that then-U.K. Prime Minister Margaret Thatcher’s “Big Bang” deregulation that allowed banks and brokers to merge would open up opportunities in fund management.

At a conference in Chicago organized by the U.S.’s National Futures Association, Ambrosiadou heard a woman who traded futures contracts describe how she had raised $50 million. “I thought, ‘OK, I can do this,’” she recalls. “I couldn’t just sit there and do nothing.”

In 1990, at the age of 31, Ambrosiadou set up an account at a London broker with $100,000 and began trading futures. Ikos (UK) Ltd. was formed the following year. During this time, Ambrosiadou also worked at KPMG LLP in Bahrain as a consultant.

By the end of 1992, Ambrosiadou and Coward decided to quit their day jobs, move to London and devote themselves full time to Ikos.

In 1992, she and Coward set up Ikos Partners, the London-based unit that provided investment-management services to Ikos. Coward owned 10 percent of Ikos Partners, while Ambrosiadou eventually owned the rest.

The Family

For several years, they traded Japanese equity warrants and index futures in managed accounts for Donald Sussman’s Paloma Partners LLC, a Greenwich, Connecticut-based hedge fund. In 1995, Ikos raised $3 million for its first fund, trading Japanese equities.

As they built the firm, Ambrosiadou was CEO, working on Ikos systems, meeting investors, hiring staff and dealing with regulators while monitoring trading performance. Coward ran research and trading, devising algorithms and developing trading software.

Coward became so close to his research team that he sometimes referred to them as his family, people close to the firm say. The “family” included research head Peter Ho, who had a Ph.D. from Oxford University, and Sam Gover, who had a doctorate from Imperial College and managed the Ikos Futures Fund. They joined the firm in 1994.

By 2006, Ikos had $3.5 billion in assets under management, more than twice as much as two years earlier. In 2005, Ambrosiadou moved Ikos’s operations to Cyprus to take advantage of low tax rates.

First Salvo

As the business grew, so did tensions within the firm. In 2006, Sam Gover’s older twin brothers, Julian and Lucien Gover, who had worked at Ikos since the mid-1990s, sued Ikos for £26 million in the U.K. High Court. They said they were owed an equity stake in Ikos and a share of its profits.

Ikos then lodged its own suit, claiming that the Gover twins, who worked on the firm’s finances and accounts, had illegally copied confidential computer files onto an iPod. The lawsuits were settled out of court in 2007, and the Gover brothers agreed to return the files.

It was the first salvo in a barrage of allegations that former Ikos employees were walking out the door with the firm’s secrets. The Gover twins declined to comment.

After being fired in 2008, Sam Gover and Ho claimed that they were unfairly dismissed and that the firm owed each of them £6 million in unpaid bonuses for 2007 and 2008.

System Crash

This year, Ikos sued Sam Gover in the U.K. High Court, claiming he had failed to test and document amendments to the computer codes, causing the system to crash at least four times from November 2007 to October 2008.

Gover also unlawfully removed and retained confidential computer files from Ikos, the suit alleges. “We believe this claim is yet another procedural tactic by Ikos,” says Gover’s lawyer, Jonathan Chamberlain of Wragge and Co. “Sam has a robust defense and counterclaim.”

Ambrosiadou allegedly began spying on Gover shortly before he was fired, according to a lawsuit Gover filed in the U.K. High Court in May 2010. He claims Ambrosiadou hired a woman named Laura Merts to find out about his plans to start his own business.

In November 2008, Merts moved into the apartment above Gover and his wife in Cyprus and introduced herself as Laura Maria Van Egmond, a wealthy Dutch acquaintance of Ambrosiadou, the lawsuit claims.

Confidential Plans

Gover says the woman befriended him and his pregnant wife, Laura Carminati. She was left alone on several occasions in the Gover and Carminati home with their eldest child and had access to their computers, which contained confidential business plans, Gover says.

According to the lawsuit, Gover’s wife told Merts that her husband wanted to establish a business in London with Ho and that they were discussing the idea of setting up a venture in Monaco with Coward.

On November 2, 2009, Merts sent an e-mail from a new address using her real name instead of Van Egmond, the lawsuit says.

Gover and his wife did a simple Web search and found her LinkedIn profile, which identified her as a consultant in covert investigations who had been trained in Israel in surveillance and counterterrorism. Telephone calls to the Inkerman Group, a business-risk and intelligence company that Gover alleges employed Merts, weren’t returned.

Surveillance Operation?

Ambrosiadou filed no defense in the Gover lawsuit and agreed to pay unspecified damages as part of an out-of-court settlement with Gover and his wife, according to legal filings. Gover and Ho have since started their own quantitative futures fund based in London called Altiq LLP, which has $90 million under management.

In May of this year, Coward came forward with spying allegations of his own. A lawsuit he filed in the U.K. High Court made these accusations: In November 2009, operatives hired by Ambrosiadou followed him from his Monaco apartment to his office and to restaurants, photographing him and the people he met. In January 2010, a month after Coward resigned from Ikos, a surveillance operation that included eight people, six cars and a motorbike tracked him in Limassol, Cyprus, allegedly under instructions from Ambrosiadou.

Ambrosiadou declined to comment on the lawsuit. An Ikos statement on May 24 said the firm acted lawfully to protect its investors’ interests by initiating investigations.

Private Jet

The legal skirmish between Coward and Ambrosiadou continued. On June 4, 2010, Coward released to the British media his legal filing in their divorce proceedings in Greece.

Ambrosiadou hit back, seeking an emergency injunction preventing further publication of divorce papers, according to the appeal granted to her by the U.K. High Court in April. Later in June, Coward flew an Ikos private jet, a Cessna Citation Mustang, to Greece from France, only to be forced to take a commercial flight back to Monaco after Ambrosiadou claimed he was using it unlawfully and police stepped in.

Coward’s High Court lawsuit alleges that this is what happened next: In St. Tropez in August 2010, a Kroll Associates U.K. Ltd. operative and two colleagues hired by Ambrosiadou trailed him and his friends to a restaurant and on to a nightclub. On October 28, 2010, operatives in a Jaguar followed him as he drove from the family home in West Sussex to Shoreham Airport in England. A later search of his car revealed that a GPS tracking device had been attached to the rear bumper.

Under Threat

Coward further alleges that in December 2010, Ambrosiadou hired Kroll to install voice-activated infrared cameras in the kitchen and study of their West Sussex home and that in March 2011 cameras recorded a long conversation between Coward and his mother in which they discussed his business plans and tax affairs.

Coward is seeking damages for harassment and breach of data-protection laws. As of mid-July, Ambrosiadou hadn’t responded to the suit. It’s not illegal to bug your own home, says Robert Brown, a law partner at Corker Binning in London.

The spying allegations came amid Ikos’s claims that its software had been under threat. Ikos filed a civil lawsuit in May in Cyprus against Vincent Pfister, who joined Ikos in Cyprus in April 2009 as research manager.

According to testimony at a June hearing in Cyprus by Ikos board member Ian Mayes, Ikos technicians discovered that in November 2009 Pfister had copied codes from Fox, Wendy and Badger, the firm’s software programs, onto a memory stick and sent it to his parents’ house in Grenoble, France.

‘Something Extraordinary’

Mayes said in court that when lawyers asked Pfister whether he gave the software files to Coward, Pfister responded: “I didn’t need to; Coward already had it.” Pfister denies passing along any data to Coward or working with him to set up a rival firm.

In his testimony, Mayes also said court-ordered raids on Coward’s office in Monaco turned up an organizational diagram of his new company, named Flot SAM, with the names of Sam Gover and Pfister on the chart in boxes.

The fight over one of the oldest hedge funds in the world doesn’t surprise Ikos board member Robert Savage, a former Goldman Sachs managing director who has known Ambrosiadou and Coward since the mid-1980s.

“There is something extraordinary about the IT at Ikos,” says Savage, who joined Ikos after Coward left. At the same time, he says, the firm’s trading software has been continuously updated since Coward resigned, making it a different machine than the one he left behind. “It’s foolhardy to think any organization managing money can be on autopilot. You have to check the weather. Ikos is designed to remove human emotions from trading decisions.”

Messy Divorce

As the legal battles over intellectual property and the messy divorce suggest, human emotions have not been far from the surface at Ikos in recent years. In her Monaco office, Ambrosiadou pauses and speaks slowly about the need to put personal distractions aside and concentrate on making money for her investors.

“My focus is on the business and on the future,” she says. At the same time, she has to get through the dozens of lawsuits that are focused on the past.

-- With assistance from Stelios Orphanides in Cyprus. Editors: Stryker McGuire, Jonathan Neumann

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