Notz Stucki & Cie SA, a Geneva-based money manager facing shrinking assets four years after reporting losses to Bernard Madoff’s Ponzi scheme, is bidding to shake off its reputation as a specialist hedge fund investor.
The firm is focusing mainly on so-called long-only strategies, which perform well when markets are rising, said Christian Stucki, who founded the company with Beat Notz in 1964 as a fund of hedge funds. Notz Stucki has cut allocations to alternative strategies, including hedge funds, to 40 percent of assets under management from about 70 percent in 2008, it said.
“Some time ago we were Notz Stucki, the famous hedge fund investors: that’s finished,” Stucki told clients at a conference in its Geneva offices yesterday. “Any kind of Tom, Dick and Harry idea was put into hedge” funds and the industry degenerated into a “zoo of animals,” he said.
While Notz Stucki hopes to grow through acquisitions and by luring clients in the Middle East and Asia, assets fell to $6 billion, a company official said yesterday, from the $7 billion reported a year earlier. Notz Stucki was among at least seven Geneva-based firms that suffered $7 billion of losses from Madoff’s fraud, which undermined the fund of hedge funds model pioneered by the city’s banks in the 1960s.
Managers of the funds charge clients fees for investing in outside hedge funds as opposed to directly in the markets. Hedge funds are largely unregulated pools of capital that can bet on falling as well as rising asset prices.
The industry, which oversees $2.1 trillion, returned an annual average of 13 percent from 1993 through 2007, according to Hedge Fund Research Inc., compared with an 8.9 percent return for the Vanguard Balanced Index Fund, which tracks a balanced mix of stocks and bonds. That performance encouraged wealthy individuals and pension funds to pay fees to funds of hedge funds for help in choosing managers who outperformed stock and bond markets.
Since 2008, hedge funds have underperformed, returning an average 0.9 percent annually compared with 3.8 percent for the Vanguard Balanced Index Fund.
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