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Hedge Fund Dichotomy: Big Vs. Small

Date: Wednesday, May 6, 2009
Author: Natasha Gural, Editor-in-Chief, Marketsmediaonline.com

There will be more consolidation among hedge funds facing multiple risks, as smaller funds struggle to compete in sea of big fish, according to managing partners on a panel at Markets Media Live's Austin Institutional Investing & Trading 2009.

"There is move to consolidation because of risks," said Mark Rzepczynski, managing partner at Lakewood Partners, citing swelling operational, compliance and credit risks. "More and more, there is a desire to deal with larger firms even if it's going to cost some performance. There is a movement from cottage (firms) to largeinstitutions."

Of high-end, multi-strategy managers, Rzepczynski said: "I don't even know exactly what they're investing in."

"We're seeing a move away from the the bigger institutions," said Timothy J. Collins, managing partner at Triplicity and Clarus Capital. "We've basically been shown the door by several (prime brokers) because we're a $10 million fund."

Collins said there is a dichotomy between smaller and larger funds. "Smaller firms need to work with mini-primes," he said.

Daniel Wallick, principal for the investment strategy group at the Vanguard Group, moderated Tuesday's panel, Hedge Fund Investing 2009, at Markets Media Live's inaugural Austin forum, which gathered a broad range of buyside leaders.