North Carolina Hedge Fund Administrator Finds Success
17 Mar 2009 12:55 EDT
By Dan Molinski of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--One can still spot success stories in the decimated world of hedge funds, even if sometimes it means looking in out-of-the-way places like Rocky Mount, N.C.
In that town, population 59,000, you'll find Nottingham Investment Administration. The small firm provides third-party administrator services to hedge funds, which means they independently calculate a fund's month-end net asset value for investors in the fund.
Nottingham's business is booming, even as the hedge fund administrator industry and that of hedge funds in general shrinks due to market declines and rising demands by frustrated investors to cash out of funds. Hedgefund.net's semi-annual survey of hedge fund administrators ranked Nottingham as the world's fastest-growing administrator, and said its assets under administration grew by 390% in the second six months of last year, to $6.6 billion. As companies across the country continue to lay off workers, Nottingham was hiring more employees.
Administrators like Nottingham may be finding success because they are seen as having little or no connection to the traditional hedge fund industry, a distinction that is increasingly being viewed as a good thing.
The hedge fund industry thrived for years partly on a premise that investors should allow fund managers to have some degree of secrecy, as this enabled them to earn above-market, "absolute" returns. In many cases, fund managers convinced high-net-worth individuals and other investors that the more secretive the fund, the better the returns would be.
But those beliefs were unmasked following the case of Bernard Madoff and other scams. Now, in the hedge funds world, cloak-and-dagger secrecy is out while clarity is in. As such, some hedge funds, funds of hedge funds and third-party administrators like Nottingham with few links to the traditional hedge fund industry are looking attractive.
Nottingham, which began as an administrator for basic mutual funds, seems to provide a degree of trust that many hedge funds are looking for in the wake of the string of corruption scandals involving the industry. Apart from calculating NAVs, Nottingham and others set up easy-to-follow Web sites that hedge fund investors can visit to track their investments, in much the same way mutual fund investors do.
After the recent fraud cases, "investors want clarity and transparency more than anything else," says Kip Meadows, founder and chief executive at Nottingham.
Another reason for Nottingham's success is the emergence of a new crop of potential hedge fund managers, former executives at banks and financial houses who have been laid off and are trying to make a new start on their own. In many cases, these former corporate executives are unsure whether to become mutual fund managers or hedge fund managers, so smaller firms like Nottingham that dabble in both are seen as a good fit.
The move by fund managers toward more transparency is also being accelerated by another trend in hedge funds, one in which pension funds and other institutional investors have become the biggest investors, de-throning high net worth individuals.
These institutional investors, in many cases, might prefer funds with third-party administrators that resemble mutual fund administrators. Boards of directors for retirement systems are growing increasingly skeptical of hedge fund investments, and so investment officers are keen to provide them with easy-to-read Web sites for tracking investments.
This is not to say the large third-party administrators aren't also adapting to this shift and adding more layers of transparency to the products they offer. Observers say the large firms are undoubtedly making whatever adjustments may be necessary to succeed, given their rather poor performance last year due to the drop in assets of the funds they administer.
-By Dan Molinski, Dow Jones Newswires; 201-938-2245; dan.molinski@dowjones.com
17 Mar 2009 12:55 EDT
By Dan Molinski of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--One can still spot success stories in the decimated world of hedge funds, even if sometimes it means looking in out-of-the-way places like Rocky Mount, N.C.
In that town, population 59,000, you'll find Nottingham Investment Administration. The small firm provides third-party administrator services to hedge funds, which means they independently calculate a fund's month-end net asset value for investors in the fund.
Nottingham's business is booming, even as the hedge fund administrator industry and that of hedge funds in general shrinks due to market declines and rising demands by frustrated investors to cash out of funds. Hedgefund.net's semi-annual survey of hedge fund administrators ranked Nottingham as the world's fastest-growing administrator, and said its assets under administration grew by 390% in the second six months of last year, to $6.6 billion. As companies across the country continue to lay off workers, Nottingham was hiring more employees.
Administrators like Nottingham may be finding success because they are seen as having little or no connection to the traditional hedge fund industry, a distinction that is increasingly being viewed as a good thing.
The hedge fund industry thrived for years partly on a premise that investors should allow fund managers to have some degree of secrecy, as this enabled them to earn above-market, "absolute" returns. In many cases, fund managers convinced high-net-worth individuals and other investors that the more secretive the fund, the better the returns would be.
But those beliefs were unmasked following the case of Bernard Madoff and other scams. Now, in the hedge funds world, cloak-and-dagger secrecy is out while clarity is in. As such, some hedge funds, funds of hedge funds and third-party administrators like Nottingham with few links to the traditional hedge fund industry are looking attractive.
Nottingham, which began as an administrator for basic mutual funds, seems to provide a degree of trust that many hedge funds are looking for in the wake of the string of corruption scandals involving the industry. Apart from calculating NAVs, Nottingham and others set up easy-to-follow Web sites that hedge fund investors can visit to track their investments, in much the same way mutual fund investors do.
After the recent fraud cases, "investors want clarity and transparency more than anything else," says Kip Meadows, founder and chief executive at Nottingham.
Another reason for Nottingham's success is the emergence of a new crop of potential hedge fund managers, former executives at banks and financial houses who have been laid off and are trying to make a new start on their own. In many cases, these former corporate executives are unsure whether to become mutual fund managers or hedge fund managers, so smaller firms like Nottingham that dabble in both are seen as a good fit.
The move by fund managers toward more transparency is also being accelerated by another trend in hedge funds, one in which pension funds and other institutional investors have become the biggest investors, de-throning high net worth individuals.
These institutional investors, in many cases, might prefer funds with third-party administrators that resemble mutual fund administrators. Boards of directors for retirement systems are growing increasingly skeptical of hedge fund investments, and so investment officers are keen to provide them with easy-to-read Web sites for tracking investments.
This is not to say the large third-party administrators aren't also adapting to this shift and adding more layers of transparency to the products they offer. Observers say the large firms are undoubtedly making whatever adjustments may be necessary to succeed, given their rather poor performance last year due to the drop in assets of the funds they administer.
-By Dan Molinski, Dow Jones Newswires; 201-938-2245; dan.molinski@dowjones.com