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How Mehraj Mattoo is renewing the German giant's alternatives business. By Shamillia Sivathambu
, The gro\ving number of investment banks getting into funds of funds has significantly improved the flow of asset gathering,
But Mattoo is acutely aware of the hurdles he is up against in a market that is essentially over-saturated and is increasingly coming under attack for its high fees and dwindling performance figures. "Investor dissatisfaction with [low] performance has meant that net inflows into FoHFs have been going down over the years. This is encouraging larger investors to invest directly into single hedge funds rather than FoHFs," Mattoo says. "But parallel with this [change], is the growing number of investment banks getting into the [FoHF] industry, which has significantly improved the flow of asset gathering this year. So
while 'independent' FoHFs have been shrinking in relative terms, asset flows into 'institutional' FoHFs have been growing significantly." According to Mattoo, investment banks, rather than large asset management firms, are best placed to host the development of 'institutional' FoHFs. He highlights a trend that is certainly developing in the industry at the present moment, best illustrated by Morgan Stanley's hunger for hedge funds acquisitions. It bought its fifth hedge fund of the year this month. "Hedge fund managers tend to originate from the [investment banks'] prop trading desks, so we are in a much better position to select and manage a bunch of [securitised] traders, which is why investment banks rather than asset managers attract hedge fund managers back into the fold," Mattoo says. Investments banks are also better equipped at handling the degree of opacity that is typical of hedge funds. "This is part of the investment bank's function," he adds. Comas' first multi-strategy FoHF, the Comas Global Alternatives (CGAL)Fund, will begin trading on 1 January 2007. The fund, which comprises eight underlying managers, has been internally seeded by CBCMand has asix-yeartrackrecord. Itwas seeded with $40m and opened to external investors for the first time 011 1 December
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t , Incentivisation is critical. If performance goes up by just 1%, you have earned your fee,
Mehraj Mattoo, Commerzbank Alternative Investment Strategies
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2006. The CGAL fund has been designed with the institutional investor in mind and is expected to be Comas' flagship institutional FoHF.
Comas Strategy Fund (CSF) and Comas Global Alternatives Fund (CGAL) were the first to receive S&P ratings. While CSF is aimed at retail investors, CGAL is an institutional product. Both CSF and CGAL are rated 'A' by S&P. "It [fund ratings] bears no impact for us but it reassures the [institutional] investor," Mattoo notes. Plans are already underway to re-dornicile all its funds in Dublin. By building a fully integrated platform in Dublin and having the funds listed on the Dublin Stock Exchange, managers can focus exclusively on delivering returns without getting bogged down with the administration of the fund. Moving all the funds to Dublin makes better administrative sense, Mattoo notes.
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, The way hedge funds are currently .divided into broad categories can be meaningless when constructing portfolios or managing style
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into portfolio construction, which is the other area we are devoting resources to. The findings of the collaborative research will continue to inform Comas' portfolio analytics group, which is responsible for ensuring the portfolio's robustness and due diligence," he says. Comas is also keen to diversify into single strategy FoHFs and has just launched a fixed income FoHF. "This is in line with our aim to deliver themebased products," Mattoo says. There are also plans to offer global macro and an Asian manager FoHF in coming months. The group is also expected to recruit a chief strategist to guide the business through the economic cycle and inform of strategic launches. Apart from offering standard FoHFs, Comas also plans to offer "bespoke solutions" to institutions that may require a more tailored offering from what already exists through its product platform. Another way the new business plans to attract institutions is through mandatory exchange listings and fund ratings. Its flagship multi-strategy funds of HFMWeek
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