A boldface name on company letterhead may bring potential
investors to the door, but celebrity counts only if the "celebrity" can offer
the fund some unique expertise. Finding an unfilled investment niche demands
priority over a star managing director. Albright’s niche, according to various
published accounts, is her access to the government officials in emerging
markets—leaders who can open doors for foreign investors. But industry veterans
John Yonemoto, formerly with Franklin Resources, and Gregory Bowes, previously
with Fairfield Greenwich Group and RBS Greenwich Capital Markets, actually
manage the investments. Albright is more of a well-connected figurehead, on hand
to provide credibility and present potential investors with a sense of
security.As with Spork, few investors have ever heard of James Casper or
Alex Waldman. But the two are convinced their backgrounds will make their
startup hedge fund successful. In February, they launched Olive Tree Capital in
Jerusalem. Casper previously owned an online foreign exchange trading business,
FXUC Solutions, while Waldman runs a diamond manufacturing and distribution
company, Waldman Diamond Group. The partners have started small, with only $5
million in seed capital. With Olive Tree, Casper plans to use mathematical
algorithms to systematically monitor and identify trading opportunities in
liquid markets. (See "Unlocking Alpha") "My FX business was successful, but I decided to sell it
because I wanted to get into the quantitative strategies market," Casper says.
His fund is registered in the Cayman Islands. Along with his experience in gems,
Waldman has been investing in hedge funds for 25 years, Casper adds. Casper says that his love of mathematics, combined with his
foreign currency background, made setting up a multistrategy algorithmic fund a
natural next step. His niche expertise comes from screening hundreds of
algorithms, finding the ones likely to be successful profit generators, then
tailoring those to suit the risk parameters of his fund. "We’re looking for
algorithms that trade purely liquid instruments, and we want to be putting on
short-term trades only, generally with no longer than 10-day holding periods,"
he adds.
Breeden, too, hopes to leverage a niche he knows well—most likely proxy
fights as only he can stage them. He has started with the Applebee’s
International restaurant chain. Breeden Capital Management owns a 5.24 percent
stake in the casual dining company, and in the first months of 2007, launched a
proxy fight to install four of Breeden’s friends on the board. (The vote was
scheduled for May, after Worth went to press.) In January, Breeden Capital
Management filed a letter with the SEC criticizing board members for allowing
Applebee’s CEO to use the corporate jet for personal beach vacations. Breeden’s
partner in his fund is friend Steven J. Quamme, a lawyer who, in recent years,
bought out Taco Bueno, Bertucci’s and Papa John’s.
Although the fund has so
far raised only $500 million of its $1.25 billion target (most of it from the
California pension fund CalPERS, which committed up to $400 million), the most
recent data from CalPERS shows that Breeden Partners, the parent of Breeden
Capital Management, gained 7.3 percent in the fourth quarter of 2006 with very
little investment activity. Double- and triple-digit gains, however, will rest
largely on the partners’ ability to turn around companies where Breeden sees
management driving share prices down to a level that makes these businesses
sufficiently undervalued.
John Ferry is an Edinburgh, Scotland–based financial journalist and a senior
correspondent for Worth.
Additional Information
 Founding
Your Fund: A Step-by-Step Guide
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