SkyBridge Capital is salting away goodwill. Anthony Scaramucci, the gregarious founder of the fund of hedge funds firm, knows he operates in a commoditized business. At the 1,800-strong SkyBridge Alternatives conference (SALT) in Las Vegas, he brings luminaries from Nicolas Sarkozy to Al Pacino together with investors, hedgies and rivals. It may help Mr. Scaramucci create a novel kind of edge.
The spread at the Bellagio includes Davos-like elements, such as a panel with former Israeli premier Ehud Barak and ex-U.S. defense secretary Leon Panetta. Movie stars and celebrity hedge fund bosses combine to create an event that's a mix of business, intellectual stimulation and partying. Mr. Scaramucci relishes the glad-handing, but it's more than just a vanity project.
SkyBridge and its competitors aren't in the best spot. After growing strongly through 2007, fund of funds assets have flat-lined since 2010 at about $650-billion (U.S.), just four-fifths of their 2007 high, according to Hedge Fund Research (HFR).
The extra fees charged by funds of funds have always taken a bite out of returns to investors. It took exposure to Bernie Madoff's fraud and the financial crisis of 2008, however, to show investors that the due diligence supposedly on offer wasn't always there.
Ray Nolte, Scaramucci's co-managing partner, is trying to reinvent the genre. This involves enhancing the usefulness of a fund of funds by picking and choosing investment themes. The approach paid off for SkyBridge in 2012. The firm's flagship product returned 21 per cent, easily outperforming HFR's indexes for funds of funds and hedge funds.
Fees have also dropped considerably. SkyBridge's roughly 1.5-per-cent charge is typically offset by about half, Mr. Nolte says, by the scale discounts the firm negotiates with fund managers. Maybe an invitation to SALT can help smooth those talks.
SALT may not make investors see SkyBridge as the Starbucks among providers of undifferentiated diner coffee . Performance and other factors matter more. But the combination seems to be working. SkyBridge has been adding $150-million of assets a month this year to a stockpile that has now reached $7.8-billion. If a fraction of that investor interest is due to SALT, Mr. Scaramucci can count his two-and-a-half day shindig a useful sweetener.
© 2007 The Globe and Mail. All rights reserved.
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