Saturday, February 03, 2007

Hedge Fund City

In recent years Greenwich has become home to a large number of hedge funds, which to the outside observer (read, your scribe) appear to be Wall Street's version of the Wild West. Largely unregulated, these funds cater to high net worth individual investors, and can charge them as much as 50% of their annual gains (though 20% is more typical). Which is fine, I suppose, as long as they're making money; on the other hand we've had a spectacular collapse recently of one local hedge fund that bet the store on the price of oil and lost.

According to the Wall Street Journal, in August of 2005 Greenwich was home to more than 100 hedge funds, with over $100 billion in assets under management. Oh, heck, let's just quote part of the WSJ story, which appeared on 8/3/2005:

"If the hedge-fund boom has a capital, it is Greenwich, a ritzy suburb of mansions and gated estates about 30 miles from Manhattan. More than 100 hedge funds -- private investment pools that cater to wealthy investors and institutions -- have set up shop here in the past few years, a sign of the industry's explosive growth. Greenwich-based hedge funds collectively manage more than $100 billion, about a tenth of the total invested in hedge funds world-wide."

Whew! Ten percent of the world's total right here in little old Greentown. And I'll bet a nickel (yeah, I'm a high-roller, all right) that the amounts stated by the WSJ are much higher now.

Interestingly, this aspect of our town has been relatively low-key up to now. If you didn't know what a hedge fund was (raise your hands, all those of you who don't have millions of spare cash on hand), you might never have known about this particular claim to fame of our fair burg. But it seems that low profile is about to change.

The UST headquarters building, across the street from the Greenwich Library, has just been bought by Antares, a local real-estate investment partnership. And what do partners Jim Cabrera and Joe Beninati plan to do with it? Bingo! - sublet it to hedge funds. Given the pent-up demand for prime office space with a Greenwich address, one expects that they will do very well indeed.

I hope the WSJ will indulge me by allowing me to print (with full credit and atttribution, of course - your scribe abominates plagiarism) a little more of their lengthy article:

"Three of the 10 richest hedge-fund billionaires -- Paul Tudor Jones, Steven Cohen and Edward Lampert -- live in Greenwich. Mr. Lampert, the head of ESL Investments, was recently ranked by Institutional Investor magazine as the highest-paid hedge-fund manager in the world, earning an estimated $1.02 billion last year.... He gained particular local attention in 2003 when he was kidnapped from the parking garage of his Greenwich office building. (He was soon released and his captors caught.)"

I remember reading about that at the time, and wondering what a hedge fund was...obviously your scribe's cash-in-hand position does not qualify him for Mr. Lampert's personal attention.

"Mr. Jones, a former cotton trader from Tennessee who earned $300 million last year according to the same survey, owns a 13,000-square-foot home on a waterfront cul-de-sac. His firm, Tudor Investment Corp., has its headquarters in a mansion in Greenwich that was once owned by Time magazine founder Henry Luce."

Again, your scribe has frequently wondered what lay behind the facade of the Luce mansion these days. Before his recent death, Hank Luce and I would often chat on the New York City cocktail circuit; it was pretty clear that he did not have fond memories of his Greenwich days, as he was not a fan of Claire Booth Luce, who married his father en secondes noces.

It is worth saying here that Mr. Jones is one of our town's more generous philanthropists. While I have not had the pleasure of meeting him personally, I know people who have, and they report him to be a gentleman of the first water. Must be that University of Virginia aura at work.

"Mr. Cohen, who the survey says earned $450 million last year running SAC Capital Advisors, has been expanding his 23,000-square-foot-home with a basketball court, skating rink and enclosed pool, according to town records."

Oops. Methinks that sounds an awful lot like the mansion on the house tour last December that left your scribe cold. Remember the "natatorium", dear reader? Oh, offense meant, Mr. C.

So there you have it, dear reader: you now know what hedge funds are, and why we here in Greenwich will be hearing and reading more about them in the days ahead. Now, let me see, should we all rush out and buy PowerBall tickets this weekend? Nah - the jackpot is only $20 million, which means a take-home net of only perhaps a third of that amount. That's probably not enough to buy us a seat at the hedge fund table. Let's wait for the jackpot to get over $100 million, and then we'll see....


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