Notz Stucki Expects to Beat Hedge-Fund Investments GainsGiles Broom
Notz Stucki & Cie, a Swiss money manager trying to stem shrinking assets, expects to beat last year’s gain in its hedge-fund investments even as it reduces allocations to alternative funds.
Investments in hedge funds including Stephen Mandel’s Lone Pine Capital LLC’s rose about 8 percent on average in 2012 and the firm’s flagship Haussmann Holdings fund jumped 9.4 percent, Hilmi Unver, head of alternative investments at Notz Stucki, said in an interview at the firm’s Geneva office.
“This is proof that the fund-of-funds industry is still very much alive,” he said, adding that Notz Stucki is targeting double-digit percentage growth for its hedge fund investments this year. “We are very happy about the returns.”
Notz Stucki was founded by Christian Stucki and Beat Notz in 1964 as a fund of hedge funds focusing on so-called long-only strategies, which perform well when markets are rising. It attracted net inflows in the second half of 2012, according to Herwig van Hove, a member of the executive committee. Assets under management fell to $6 billion in 2012, a company official said last month, from $7 billion a year ago.
The firm, which is seeking to grow through acquisitions and by luring emerging-market clients, cut allocations to alternative strategies, including hedge funds, to 40 percent of assets under management from about 70 percent in 2008, it said Jan. 9.
Lone Pine Capital’s Lone Cedar, Lone Pinon and Lone Monterey funds last year returned 24.5 percent, 27.7 percent and 29.7 percent, respectively, according to Unver.
Notz Stucki charges clients fees for funneling assets into outside hedge funds, rather than making direct market investments itself. Hedge funds are largely unregulated pools of capital that can bet on falling as well as rising asset prices.
The hedge fund industry, which oversees $2.3 trillion, returned an annual average of 13 percent from 1993 through 2007, according to Hedge Fund Research Inc., compared with an 8.9 percent return for the Vanguard Balanced Index Fund, which tracks a mix of stocks and bonds.
That performance encouraged wealthy individuals and pension funds to pay fees to funds of hedge funds for help in choosing managers who outperformed financial market benchmarks.
Since 2008, hedge funds have underperformed, returning an annual average of 1.5 percent through 2012, according to Hedge Fund Research Inc., compared with a 4.1 percent gain for the Vanguard Balanced Index Fund.
The 39 managers with whom Haussmann invested either made money or broke even last year, Unver said. That helped the fund outperform the 4.7 percent gain in the Hedge Fund Research Inc. Funds of Funds Composite Index. The MSCI World Index, a benchmark of developed-market equities, has gained 13 percent.
“From 2008 until last year, it was fair to question whether it made sense to be invested in hedge funds,” Unver said. “Now you might not allocate all your money to these strategies but it’s still a good idea to have a proportion of your wealth in hedge funds, leaving someone else to decide the market timing for you.”