HedgeCo.net ( New York ) Larkspur, CA, September 6, 2006 – LRG Capital Group LLC, a global merchant bank that invests in small and mid-cap public companies, today announced thatDavid Deutsch, the Chief Investment Officer of the San Diego County Employee Retirement Association Pension Fund (SDCERA) spoke at an investor forum the firm recently held in San Diego.
Mr. Deutsch stated that the average fixed 4-5% pension allocation to hedge funds makes no sense as alternative investments should not be treated as a separate asset class, with each investmentopportunity being viewed as a one off deal.
He added that fund-of-funds have bred mediocrity and he expects downward pressure on their fee structure as institutional investors become more sophisticated and make greater use of multi-strategymanagers. Deutsch also expects to see downward fee pressure on most emerging funds that are competing for assets with larger and established outfits.
On the pertinent topic of transparency, Deutsch said that many hedge funds still do not offer transparency and he doesnt expect this to change in the near term, especially with the larger funds. Herelies on return based factors to offset the absence of transparency from these managers commenting that no one cares about inefficiencies and transparency if a manager produces outsized returns.
Lawrence Goldfarb, CEO of LRG Capital cited that smaller managers are willing to give transparency, unless the information provided can materially hurt the fund. Goldfarb agreed with Deutchsprediction on fee compression and noted that fees will also come down for single strategy manages who consistently under perform and have an asset gatherer as opposed to alpha hunter mentality.
Deutsch said that SDCERA has been successful in negotiating lower fees through longer lock-up periods. From Goldfarbs point of view, longer lock-ups do benefit the fund manager, but also the investoras they are not at the mercy of other investors redeeming ahead of them.
LRG Capital Group is a merchant bank that invests in and provides advisory services to small-to-mid size capitalization public and private companies. With offices in San Francisco, New York andMiami, the firm represents companies on equity and debt placements, restructurings, recapitalizations, management buyouts and other strategic alternatives. While managing a diversified portfolio ofcompanies, LRG Capital has been recognized for its success in financing companies in the Technology, Life Sciences and Entertainment sectors in the U.S. and globally over the last decade.
Sophie Sophaon l Walek & Associates l Office: 212.590.0522 l Cell: 202.270.4870 l ssophaon@walek.com
