The Buy Side - Hedge Funds And Pension


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The Buy Side - Hedge Funds And Pension

  1. 1. The Buy Side - Hedge Funds and Pension Funds Jennifer Fraser Commodity Portfolio Manager Ridgefield Capital
  2. 2. My Background- Commodity Strategist and PM <ul><li>2005-2009 - Ridgefield Capital Asset Management (Multi- commodity and basic materials equity hedge fund). </li></ul><ul><li>2002-2004 - Centaurus Energy (Natural Gas Hedge Fund- commodity only). </li></ul><ul><li>2001-2002 - Tudor Investments – Ospraie Funds (Multi- commodity and basic materials equity hedge fund). </li></ul><ul><li>1997 – 2001 - Enron Corporation. </li></ul><ul><li>MBA (University of Toronto, 1997). </li></ul><ul><li>MA - History (Université de Montréal, 1994). </li></ul><ul><li>BSc - Microbiology and Immunology (McGill, 1990). </li></ul>
  3. 3. What does a PM do? <ul><li>They DO ideas: Generate investment ideas / themes then structure appropriate vehicle for the investment (fixed price, time spreads, options, swaptions, basis spreads, cross-commodity). </li></ul><ul><li>They DON’T trade: Trading / execution is a utility function and trading team compensation reflects it. Trading desks execute shopping lists on the buy side. ( and it’s almost all electronic). </li></ul>
  4. 4. How did I get here: Ski Instructing/ Waitressing to Asset Management <ul><li>1990 = RECESSION = no jobs - so you do what you need to do. </li></ul><ul><li>Enron – The good things: largest natural gas marketer in North America – At one point owned 20% of pipeline capacity and moved 20% of natural gas – learned industry bottom up and did every grunt job there was. </li></ul><ul><li>Fell on my face more times that I can count – but you have to get back up. </li></ul>
  5. 5. Following the $$$: Pay Scale and Compensation <ul><li>Hedge funds: PM gets 10% - 30% of upside. i.e. 100$ mln AUM makes 25% or 25 mln$- PM collects 5$ mln = rewards short term performance. </li></ul><ul><li>Pension Funds: Lower comp in the front years but increases over time = rewards long term performance. </li></ul><ul><li>Analysts and associates make 85$K to 150 K$/yr – with bonus solely at discretion of PM. i.e I pay you out of my bonus pool. </li></ul><ul><li>Analysts and associates typically cost money for 2-4 years – errors, learning curve and execution errors. </li></ul>
  6. 6. Getting in the door: <ul><li>Distinguish yourself in a particular industry / sector- anyone can do comps- not everyone can bring an idea and or insight to the table. </li></ul><ul><li>Work for a specific basic resource company – XOM, CVX, TOT, ECA etc – </li></ul><ul><li>Build a network in the industry not just a list of ibanking analysts and associates. </li></ul><ul><li>Know your industry inside and out : production, transport, consumption, regulation, etc. </li></ul>
  7. 7. Random Events - Hurricanes <ul><li>Waves not wind do the damage- water is heavy. </li></ul><ul><li>Storm damage is often underestimated. </li></ul><ul><li>This is where knowing your pipes comes in handy. </li></ul><ul><li>Proactive instead of reactive. </li></ul>
  8. 8. Getting Natural Gas and Crude Oil to Market
  9. 9. Gulf of Mexico – Nat Gas Infrastructure
  10. 11. ENB Gathering System: Direct Hit By Ike and Gustav IKE Gustav
  11. 12. GOM: Major Platforms
  12. 13. Hurricane Flooding: Knocks out Onshore Processing
  13. 14. Closing thoughts: Commodities vs Equities <ul><li>Pure play – no more guessing about management. </li></ul><ul><li>There is no equity story without a commodity story – learn the industry from the inside. </li></ul><ul><li>Get “your hands dirty” with actual product. </li></ul><ul><li>Far too many equity analysts can’t find Cushing, OK or Erath, LA on a map. </li></ul>
  14. 15. Contact Info: <ul><li>Email: </li></ul>