The Peddlers
Josephine Lee, Forbes Magazine, 08.06.01
Hedge funds may rake in enormous fees, but they're nowhere without investors. And since hedgies by law can't advertise, they must lure money in other ways.
That's where middleman Jane Halsey comes in. An elegant blonde with a golden Rolodex, she invited 75 well-off guests to the august Rainbow Room atop Rockefeller Center recently. Also on hand: 20 of her paying customers from hedge funds. As these fund managers chatted up Halsey's big-bucks pals amid the drinks and the food, she said: "It's the Martha Stewart approach to hedge fund marketing. It's a more intimate and elegant way to provide exposure for managers."
It certainly was a good thing for Halsey, who charged each manager $10,000 for the privilege. One manager, Robert Z. Bliss, whose Windmill Partners fund moves in and out of mutual funds to capture purported market inefficiencies, didn't sign up a single investor that day. But he's considering hiring Halsey to bring him clients directly. That won't be cheap. She wants one-fifth of his management and incentive fees.
Seems as if those fat hedge fund fees aren't all gravy. Some marketers are even more costly than Halsey. Marketer Kenneth G. Rogers of Arrow Investments pitches hedge funds to brokerages and financial advisers. His bill: a $100,000 to $200,000 retainer plus 20% to 30% of the management and incentive fees generated by whatever he raises.
Some marketers partner up with managers they represent. Bruce H. Lipnick's Asset Alliance invests in hedge fund management companies in exchange for half of the companies' future earnings. He helps fund managers with logistics, such as getting office space and Bloomberg terminals.
The Internet is a lower-cost alternative to flog hedge funds. Like HedgeWorld Markets, which operates a Web portal offering a bulletin board for postings from managers, along with free hedge fund news and information. Ultimately, founder Johann Wong wants to build an electronic exchange where fund shares can be bought and sold.
Of course, not everything on the Web is on the up-and-up. Those scanning the HedgeFund.net site last spring saw the Blue Water Fund featured. The site did not disclose that HedgeFund.net head Alexander Shogren was a director of Blue Water. Later, when Blue Water and Shogren became defendants in an investor lawsuit, the site did not report the news, though other media outlets picked up the story. The allegation: Fund managers and directors fraudulently touted a thinly held stock that the fund owned in order to inflate the portfolio's value. Shogren won't comment on the suit, which has since been settled. Last September he sold HedgeFund.net.
Does a marketer act as a screening agent? Not often. Diem Consultants' Mark Nichols helped scamster Michael Berger raise $180 million in 1998 and 1999 for Berger's Manhattan Investment Fund. Nichols won't comment. |
