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A NEW CHANNEL OF COMMUNICATION FROM US TO YOU
Greetings! With this e-mail, we'd like to introduce a new form of communication from Federal Street Advisors: Insights from Federal Street. With the
enhancement of our Family Office Services offerings, we thought this was the
right time to expand the ways in which we communicate with colleagues, partners
and friends of the firm.
Through this eNewsletter, we will offer our opinions and research
on relevant and timely topics that relate directly to our industry and the
clients we serve. Our clients often turn to us for support in managing the multiple
facets of their wealth, lives and legacy. Among other topics, we'll look at
investment, financial, tax and estate planning, as well as family, charity and second
generation management, all with an eye toward better serving our clients.
Future issues of Insights
from Federal Street will include articles written by the professionals at Federal
Street Advisors. We will also share opinions and insights from the many experts
we work with across the industry. We welcome your feedback and suggestions for
enhancing and improving this eNewsletter as we move forward.
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"PET THE PIT BULL":
DEMYSTIFYING HEDGE FUNDS
Of late, our investment professionals have had many interesting
debates on hedge funds, and discussed questions that our clients have been
asking: "Why did hedge funds not 'hedge' as well as expected in 2008?" And, "how were hedge funds to blame for the overall
market's performance?" And, "what is the future of the hedge fund industry and
what exactly are the risks?"
These conversations gave us the idea that professionals at
other firms would benefit from a seminar where we provided our insight into
hedge funds. So a few weeks ago, we hosted an event titled "Pet the Pit Bull"
moderated by Federal Street's Senior Research Analyst, Ben Deschaine, with
special guest speakers Todd Hammer and Austin McClintock from North Run Capital
Partners.
The purpose of the
event was to separate fact from fiction on the topic of hedge fund risk. Our
guests included a number of respected colleagues in the industry, many of whom
act in a fiduciary capacity to our clients. Our guests' questions focused on
the topics of hedge fund liquidity, transparency and the overall role that hedge
funds play in a portfolio.
The speakers
discussed such issues as gating, or restricting redemptions, and
differentiating between gating which is done "for profit" and gating that is
done "for protection". Last year, while many firms were forced to gate in order
to protect the interests of investors, others may have chosen to gate so as to protect
their own profits. The speakers also clarified that there was limited gating in
the long/short equity hedge fund universe and that much of the gating occurred
in the credit space and/or in funds where a high degree of leverage was used.
On the topic of
transparency, the speakers were clear in emphasizing that the most basic form
of due diligence includes access to hedge fund management. Only through regular
contact with the key decision makers, combined with third party verification of
hedge fund assets, can you truly understand what comprises a hedge fund
portfolio.
One of the best
questions of the day focused on the whether or not a hedge fund is a "fiduciary
investment". The answer was simply that hedge fund due diligence is no
different than any other type of due diligence. It's not just about reading a
prospectus or a fact sheet. It's about digging in deep to understand the
workings of the people, the firm and the investment process. If you can't
understand what's going on, you simply walk away.
This and all discussions amongst our team are ongoing and we
welcome your perspective. For further insight into Federal Street's perspective, Kristin Fafard,
our Director of Research, has written an article on hedge funds and how they
performed in 2008. Click to request the 2008 Hedge Fund Year in Review article.
To contribute your own thoughts, please feel free to
reach out to Ben Deschaine, our Senior Research
Analyst, who focuses his research on hedge funds and private equity
investments.
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THE FEDERAL STREET READING LIST
Since our earliest days, clients have been asking us to "recommend
a good book" on a wide array of topics. As you would expect, we have always been
happy to oblige. In fulfilling these requests, we've also built up quite a list
of helpful, enlightening and entertaining reads.
We are pleased to announce that our reading list is now
available on our website, grouped by subject matter. Wherever possible, we have
also included links that allow users to purchase the books from online
bookstores. We don't have relationships with any of the online retailers, but
offer the link as a convenience.
Click to access the Federal Street Reading List.
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NEW & IMPROVED FEDERALSTREET.COM
In the last few weeks, we have completed an upgrade and
expansion of the entire Federal Street Advisors website. We've added new
sections, including Family Office Services, expanded others and streamlined a
few to make them easier to read and use.
You can now learn about the firm, gain insight into our perspective, sift
through our views of current trends and, as we mentioned above, access some of
our favorite books.
As always, we welcome your feedback and encourage suggestions
on how to enhance and improve our site.
Click to access the Federal Street website.
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