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Ronen Schwartzman, the Founder and Chief Executive Officer of Ten Capital Advisors, has over 12 years of investment and capital markets experience.
Prior to founding Ten Capital Advisors, he served as the Investment Manager of Yellow Brick Capital, a multi-family office focused on alternative investments, which he led to a highly profitable year in 2008 – the worst year in the history of hedge fund industry. Prior to that Ronen worked for 4 years at Bear Stearns in New York where he managed equity and fixed income portfolios for individuals and corporations. He also advised institutional investors on capital markets investments.
MO: What inspired you to launch Ten Capital Advisors?
Ronen: My idea to begin Ten Capital Advisors came after 2008, which was the worst year in the history of the hedge funds industry. The HFRI index was down 19% for the first time ever. In addition to the losses, hedge fund managers imposed gates on their funds, not allowing investors to get access to their money. Additionally, managers suspended redemptions and used side pockets, all of which infuriated investors. Monitoring all this activity, I discovered a need in the market for true objective advice and evaluation assessing hedge funds for investors. When my previous employer decided to relocate its operation to London, while also keeping me as its outside consultant, I realized there was a true opportunity. It was time for me to start my own venture. I launched the company in November 2009.
MO: Can you expand a bit on the process which allows your firm to source talented emerging managers before they appear on other investors’ radars?
Ronen: My definition of an emerging manager is a hedge fund that has assets under management between $100MM – $300M and active track record of 1-3 years. Since these are smaller funds, they are not on the banks platforms nor will investors read about them in the newspapers. In order to find these talented managers investors need an investment professional that eats, drinks and breathes hedge funds and has the right networks and connections to get to know these funds. There are a few methods that we use to source these talented managers: First, we created a think tank for family offices. This is a group of 8 families that meets once a month to discuss the hedge fund industry and specific managers. This is a terrific resource as everybody in the group is “Buy Side” minded and no one competes with each other. The environment at these meetings is very much “Sharing the Knowledge”. Second, as a Wharton MBA alumnus, I am a member of the Wharton Hedge Fund Network which is a group that meets every two months and offers a great opportunity to meet new talented managers. Third, I am a frequent speaker at many hedge fund industry conferences which always provide an occasion to meet and dialogue with new and important funds.
MO: What are some of your points of differentiation?
Ronen: Some of our points of differentiation include: (1) focus on emerging managers versus the established funds. Emerging managers tend to out-perform the larger and established managers; most of their founder’s net worth is invested in the fund, which presents a better alignment of interest with the other investors and we have a much better access to the portfolio manager both during our due diligence and monitoring process. (2) Our due diligence work is based on our own real life investing experience in the capital markets and not only on manager analysis. So when we ask a portfolio manager to explain what he does when his top investment idea is down 20%, we can understand his rationale because we have sat in the same seat before. (3) We are truly objective advisors to our clients; we are independent and thus not limited to any platform or approved list but rather we recommend to our clients those funds that we believe are the most appropriate for them and match their risk reward profile and liquidity needs while also providing them the highest level of transparency.
MO: Why do you put a strong emphasis on diversification in the portfolios of your clients?
Ronen: I am a former employee of Bear Stearns & Co. Roughly a third of the firm, which was a great place to work and learn, was owned by employees. When JPMorgan “purchased” the bank for $10 per share most of the employees lost most of their entire net liquid worth. This was a very powerful lesson that taught not to put all your investment eggs in one basket. As a result, we put an emphasis in the portfolios of our clients to be diverse and not too concentrated. Therefore the managers we recommend in the different portfolios come from different investment strategies (Long / short equity, credit, global macro, commodities, etc.) and from different parts of the world. Before we begin to recommend managers to our clients, one of the questions we ask clients is what other financial assets they own since we don’t want the hedge fund managers in their portfolio to trade the same names and by that create too much concentration in a certain sector or asset class.
MO: Can you explain how your company solves the fund of funds model problems?
Ronen: Ten Capital Advisors is a hedge funds advisory company. We are outside advisors for our clients; we do not have discretion on their investment decisions, we do not have a product (no pooling of assets) nor do we have an investment platform. Instead, we tailor customized portfolios to match our clients risk reward profile; this allows us to find the managers we believe are the best fit for our clients without having any limitations. Hedge funds have some liquidity restrains (i.e. they are not stocks or mutual funds we can buy and sell and get our money back in three days); Since the result of our advisory solutions are bespoke portfolios we take into consideration our clients liquidity needs when we recommend a fund to them. Our clients subscribe directly to the hedge funds, which provide them a complete transparency into their portfolio and holdings. They know exactly which managers they are invested with and what is the monthly change in NAV for each manager. We get paid only by our clients and our fees are more cost effective than investing with a fund of funds. Doing all of the above, I truly believe we are fixing the fund of funds industry problems.
MO: What’s the most exciting thing on the horizon for you personally or professionally?
Ronen: We recently signed a new client to our firm. Because we work with a few select number of families, we get to know them personally. This is always a very exciting process for me as we get to learn about our clients, their family, personal story, and off course investment goals. We are their personal financial advisor and appreciative of their trust in us. We also have a very promising pipeline of new managers we are in the initial process of due diligence; it is always very exciting to meet smart money managers and learn about their investment styles and views of the world. Personally, our 2.5 years old daughter is beginning nursery school and our 5 year old just began kindergarten. They are amazing children and it is mind blowing how fast time flies.
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