John Ferry
03/01/2007
Ivor Jacobson, a former financier who now lives in Rancho Santa Fe, Calif., wanted to both free up liquidity and leverage his hedge fund exposures on an ongoing basis. The self-made Jacobson, a South African by birth, started his own trade finance company in the late 1960s and now controls the Anglo African Group, one of the world’s largest international trade finance houses, with turnover exceeding half a billion dollars per year.
For the last several years, Jacobson has focused on building a diversified hedge fund portfolio, primarily by using his and his company’s money. “By 1999, I had already had a fund of funds running within the group for many years, but I never blew it up to any substantial size,” he says. “Then from 2000 to 2005, I built up the fund of funds, always with proprietary capital—the Anglo African Group capital and also money from various trusts that I have throughout the world.”
Jacobson’s fund of funds—called the Santa Fe Diversified Fund—officially launched in May 2005. But when he says “launch,” Jacobson does not mean he opened the fund up to any interested investor. He says he feels most comfortable accepting friends and associates as shareholders. It is the usual story of a family office acquiring niche competence in a certain area of investment, and then providing that expertise to other wealthy individuals and families.
Santa Fe Diversified currently has assets under management of $55 million and invests in 37 underlying funds, which are spread across the range of hedge fund styles, from long-short equity to event driven. When Jacobson set out to leverage his portfolio, it was valued at around $40 million, he says. He opted to gain the leverage through one of the option structures that SG Americas Securities offers. This effectively gave Jacobson the same exposure he had previously, but for a much smaller cash outlay, thereby releasing capital to be used elsewhere. “I took $10 million out of my pocket and borrowed $30 million from SG,” he says. “Since then, it has appreciated at 23 percent per annum.”
Jacobson says he found three investment banks that offered the hedge fund liquidity service. As well as SG, Australia’s Macquarie Bank and the Royal Bank of Canada also provide the service. But what about the Wall Street institutions? “The real big players have their own [proprietary] programs, and I think this is why they don’t make this available to the general public,” he says.
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