JULY 23, 2010
By CASSELL BRYAN-LOW
Two well-known U.S. hedge-fund managers, John Paulson and Barton Biggs, are considering launching funds in hopes of expanding their European investor base, people familiar with the matter said.
Mr. Paulson, best known for making billions of dollars on the back of the U.S. housing-market collapse, and former Morgan Stanley chief strategist Mr. Biggs each are looking to types of funds known as Undertakings for Collective Investment in Transferable Securities Directive, or UCITS, which come under a European standard for open-ended investment funds.
With these moves, the U.S. managers would join European managers who have increasingly adopted these structures over the past year or so.
By launching such Europe-based funds, many big-name managers are hoping to tap into institutional investors, such as pension funds, banks and family offices, that might otherwise be restricted from investing in funds based in the Cayman Islands or other non-European locales, as hedge funds often are.
The more heavily regulated UCITS funds allow investors more frequent withdrawals and greater transparency than most traditional hedge funds and some have lower thresholds for minimum investments.
"There is also a perception issue. The institutional-investor market within Europe looks at UCITS as a regulated hedge fund, and that gives them comfort," says Robert Mirsky, managing director at London-based hedge-fund consultant Laven Partners.
Mr. Paulson, whose New York-based Paulson & Co. has about $31 billion in assets, plans to launch a UCITS fund in the coming months to track existing investment strategies, a person familiar with the matter said.
Despite stellar returns in recent years, Mr. Paulson has run into tough patches this year. His largest fund, Paulson Advantage, fell 4.4% in June. His smaller Advantage Plus fund fell nearly 7% in June, while his gold fund was up 7.3% for the month.
Mr. Biggs, who co-founded Traxis Partners LP in 2003, is considering launching a similar structure later this year, another person said. Traxis, which also is based in New York, manages about $1.1 billion.
The moves by both managers to launch UCITS funds were earlier reported by industry publication HFM Week, owned by London's Pageant Media Ltd. Both managers are looking to launch the funds in conjunction with Germany's Deutsche Bank AG.
Some investors say the structures aren't appealing because of restrictions on managers in terms of leverage and certain hedging techniques, and limits on concentration of investments in certain assets. As a result, sSome investors say they are concerned a manager's UCITS fund might not perform as well as the flagship fund it is modeled on.
Europe's largest hedge-fund manager, London-based Brevan Howard Asset Management LLP, this year moved to restructure one of its UCITS funds because it failed to attract enough investor interest.
Investors have poured more than $100 billion into UCITS hedge funds, according to Eurekahedge, a Singapore-based research company. Eurekahedge also says that in Europe more than half of all hedge-fund launches during the first half of this year came under UCITS, or the Undertakings for Collective Investment in Transferable Securities Directive.
—Marietta Cauchi contributed to this article.
Write to Cassell Bryan-Low at cassell.bryan-low@wsj.com
From The Wall Street Journal published on Jul 23, 2010
