Italian multi-family office Global Wealth Management
Group expects its new hedge fund to hit €50m in assets under
management by the end of August, despite the climate
generated by the Madoff scandal. Chief executive Peter
Sartogo tells Farah Halime why he thinks the time is right to
venture into hedge funds.
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Bernard Madoff has a lot to answer for. The convicted
fraudster swindled an estimated $18bn out of investors, including
private banks, casting a pall over the hedge fund industry.
Italian wealth manager Global
Wealth Management (GWM) Group has launched a UCITS III fund hedge,
called 7H Absolute, with high growth targets into this difficult
post-Madoff climate. Is the timing right for a multi-family office
to launch a hedge fund?
“[The new fund] is a way of dipping
your toes with a much reduced risk and volatility,” says Peter
Sartogo, chief executive and managing partner of GWM
Institutional.
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By GlobalDataHedge fund
mis-selling
“A lot of people have been hurt by
the mis-selling of the hedge fund industry by banks or asset
managers, ” says Sartogo. “They’ve been burnt by being too exposed
on a single manager. By not owning a well diversified portfolio of
hedge fund managers and strategies. Or by owning hedge funds that
were using just too much leverage.”
Wealth management groups like GWM,
multi-family and family offices often invest in hedge funds but it
is rare for them to generate their own funds as risks are high.
Launching hedge funds also raises questions about how independent
its investment advice might be. Given the choice, would GWM favour
another hedge fund over their own?
A conflict of
interest?
Sartogo does not think the new fund
is a conflict of interest.
“GWM also has a multi strategy fund
of fund with 40 underlying hedge funds in different strategies that
could be seen as competitors to 7H Absolute. It doesn’t change the
way we manage our funds,” he says.
Assets under management (AuM) in 7H
Absolute are expected to increase 67% to €50m ($64m) by the end
August, having started June at €30m. The fund invests only in
European equities on a long/short basis. GWM Multi Family office
division caters to a European and Middle-Eastern family client
base. As a UCITS III fund, 7H Absolute is regulated and demands
minimum levels of liquidity and diversification.
The hedge fund bad
days
Sartogo admits the hedge fund
industry has seen bad days but says the important thing is for
clients to get an absolute return, irrespective of equity market
movements.
“I think a lot of our clients
should think the way we do, particularly after the financial
tsunami we just went through,” Sartogo says. “[They should] think
of absolute return [and] trying to have a portfolio which isn’t as
volatile as markets are.”
UCITS III funds have gained in
popularity as a way of diversifying fund managers’ client base, and
also with investors seeking the comfort that a regulated structure
can offer.
Private banking
aspirations?
GWM was launched as a
multi-family office in Geneva 10 years ago by Italian aristocrat
Sigieri Diaz Della Vittoria Pallavicini. GWM Group has since grown
to four core pillars with €2bn total AuM; wealth; merchant;
institutional and Sodali, which specialises in corporate governance
and shareholder response.
The latest move to launch the UCITS
III hedge fund arguably hints at ambitions to move into private
banking where a wide number of products and services are
offered.
“We have no interest in becoming a
bank,” Sartogo says. “We are a trusted adviser and get paid if we
do well and do not get paid if we don’t.”
15% annual returns from 7H
Absolute
Sartogo says the fund is targeting
an annual return of 15% and expects 7H Absolute to manage up to
€400m in assets eventually. Headed by Italian fund managers, Simone
Chelini and Pietropaolo Rinaldi, 7H Absolute has already seen a
return of 2.5%, with June experiencing a particularly positive
performance (return of 1.7%).
Chelini, who has 15 years of
experience in the investment industry, is optimistic.
“We have managed to have a fairly
positive performance compared to negative equity markets,” he
says.
Chelini adds the fund is on target
to achieve its goal for the end of the month after reaching €35m in
assets as an investment of €5m came in.
Waiting for ‘big
fish’
“We are waiting for a big fish from
an institutional investor, so we are on target. We are just waiting
for this right investment,” Chelini says. “This type of product has
a snowball effect. I am sure once the fund performs, money will
come in because there is a fantastic, huge appetite.”
Sartogo says the launch of the
hedge fund does not indicate investor sentiment shifting back to
riskier investments.
“This has nothing to do with the risk clients are willing to
take,” he says. “It has more to do with philosophy – do you want to
try to have a compounded return with a reduced volatility? This is
one of the best options you have.”
