You started this in 1992, 1994? given all the regulatory requirements, given the investing landscape, would you set up shop today?
Well, there's no question that setting up a hedge fund today is more caleninging than it was when we started highbridge.
My partner and i co-founded highbridge in 1992. that being said, you make a good point about the pressure that the big financial institutions are under and they're shedding certain business lines and those business lines are being picked up by opportunistic hedge fund operations.
There continues to be a lot of opportunity but the industry itself is far more mature, the competitive landscape is much tougher, but again, this secular change where banks are getting out of businesses is providing opportunities for both the incumbent hedge fund as well as new hedge funds.
Bruce, we've actually talked about this subject before and you said there are these tremendous opportunities in europe.
Are they coming at the pace you expect them to, and are your investors willing to wait this long?
If you went out and tried to garner up a budge of investors to invest in europe, even two years ago, into 2012 there were big risks associated with that, number one, would the euro stay together and would the banks be able to fund themselves and function with the capital markets in europe?
Would they perform well?
Would they be able to fund the investments given greece were about to default.
You had all these macroissues and number one, the investment communities was reticent to deploy capital and banks weren't ready to sell assets.
Now you fast forward where greece has already defaulted, ireland which couldn't fund themselves at 12% are funding themselves at 3% and 4%. italy and spain at the cusp of not being able to finance themselves are able to function and invest in the capital markets.
And the banks thanks to rtr-1 and ltr-2 and e.c.b. and the banks have been able to reconcile.
With the sovereign crisis not being in a crisis mode with the banks being stabilized and europe is coming out of a recession, now the banks are in position and more profitable and in better position to sell assets.
So in ireland you have nomma and spain you have sereb and the government institutions that have been set up to acquire assets and are selling assets as well as the bank are selling assets.
It's not a floodgate of assets but at any point in time, i'm sure marc, and i'll speak for myself, we're out there looking at three, five, 10 packages on a given day from various banks.
You get to see these packages because of the funds you run, because of your brand name, because of the decade you've been in business.
What's it like for those smaller guys who don't have access to the opportunities you do?
Are they coming to you and saying help me out, just buy my fund?
I think there's no question that the larger institutional hedge fund organizations, if you will, have a competitive advantage to smaller funds, particularly in the area of accessing and sourcing deal flow.
And other competitive edge i think the larger firms have is the ability to hire and retain enough talent.
Going to my comment earlier, the difference between 1992 and 2013, it's a far more competitive industry and think there's no question the larger, more institutional hedge fund organizations represented by the three of us here as an example definitely have a competitive advantage.
Mark, how easy is it for you to hire people right now?
Is there anyone of top talent level left in banks?
In all sincerity, you all started on the self side, at one point you might have thought maybe one day i could be the c.e.o. of a bank.
Would you even want that job?
i don't think anybody would want it.
No, look, i think you still have talented people at banks because they have lockups and money that's owed to them so they're not going anywhere.
That's not what we're thinking.
That would give me no reason to want to be a shareholder of a bank because the people who run those banks have long lockups and stocks stuck there so i should own shares of jp morgan.
That doesn't feel like a positive case.
I would agree but when you look at firms like ours, you do have the ability to hire a lot of different people.
I think you had a great point, it is really hard for somebody today to compete.
It just is.
And the reason for it is a lot of what bruce and glenn said.
People come to us with their product.
And if you're a small guy -- think of it, if you're a small guy, you've got to massively outperform whatever the three of us are doing.
Why would somebody take all the different risks of inslesting -- investing in a small fund if they're really not going to outperform us?
I wouldn't. if we're up 10, a small guy should be up 20. you've got to be up double what we are for an investor to take all those risks.
Or he could charge far less fees?
Are you in an environment now where hedge fund returns aren't what they used to be?
Are you under a tremendous amount of pressure, whether it's from other funds willing to cut fees or investors who are saying you're not delivering what the s&p is, i don't want to pay 20%. i think fees are an odd issue in our industry.
People talk about well, should you be paying 2/20 or 3/30, why not negotiate and pay 1/15? i'm personally of the opinion there's a binear outcome at looking at fees.
Either you decide to invest with a manager and the market equilibrium have set the fees at a rate and you feel the value proposition is positive and you want to invest with that manager or you don't. it's as simple as that.
To negotiate with a manager and say look, i would buy you at 1.5% and 15, i'm not comfortablor your fees at 2/20 i think is a ridiculous discussion to have.
Having said that, glenn, large institution want discounts for allocating large
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