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| Risk & Reward: Strategy: Cash Withdrawals |
Going Liquid: The Santa Fe Diversified Fund
John Ferry
03/01/2007
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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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