My Yahoo!When Guy's hedge fund was launched, it was a new idea in the U.K. Since then, several other firms have started to run hedge funds alongside their traditional funds. Gartmore itself has hedge funds for emerging markets (Key Global Emerging Markets) and Japanese stocks (AlphaGen Hokuto), and on Mar. 1, it launched a European small-cap hedge fund (AlphaGen Cepheus).
For fund-management companies, it's an ideal solution to the growing problem of brain drain, as top managers leave to start their own shops. There were only a hundred or so hedge funds in Europe at the time of Capella's launch. The number is now more than 300; several hundred more are expected to launch this year.
The fund company keeps its talent and gets a piece of the action through lucrative hedge-fund fees. Capella, for example, charges 1.5% a year in expenses and 20% of profits above a certain hurdle rate. If Guy and his team can beat their benchmark by 20 percentage points, the fund clears $40 million, assuming assets of $1 billion. (Guy's portion of that profit is not disclosed).
Upsetting if you're a manager down the hall from Guy and don't run a hedge fund. But Gartmore has addressed that: a chunk of the profits is parceled out to everyone who assists Guy and his team; another chunk goes into a bonus pool shared by all.
On his own, Guy wouldn't have to share, but don't expect him to leave any time soon. "I love fund management, but I don't want to be bothered with setting up my own company and all the hassles that go with it. I'm probably more focused on the fund now than I would be if I had my own company."
Besides, Guy sees the mutual fund and hedge funds as intellectual complements. "Some say you can't run a hedge fund and a traditional fund. Having the long-only fund makes you think longer-term. With a hedge fund alone, it's easy to get focused on what's happening today or in the next half hour."
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