PR OFILE
Fig.1 SkyBridge Asset Growth
1,000,000,000 2,000,000,000 3,000,000,000 4,000,000,000 5,000,000,000 6,000,000,000 7,000,000,000 8,000,000,000 9,000,000,000 10,000,000,000 11,000,000,000 12,000,000,000 13,000,000,000
0
Source: SkyBridge
Investor Education and The SALT Conference SkyBridge continues to play a prominent role in industry advocacy and investor education, through the SkyBridge Alternatives (SALT) Conference, conceived by partner Victor Oviedo and held annually each May in Las Vegas since 2009; and other international thought leadership events that are held throughout the world. Anthony Scaramucci is also the co- host of the iconic US television show Wall Street Week and is a regular contributor to Fox Business News. He has also published two books titled ‘Goodbye Gordon Gekko: How to Find Your Fortune without Losing your Soul’ and ‘The Little Book of Hedge Funds’. All of these efforts have been designed to “bring the hedge fund industry to a broader audience with the goal of providing investors with access to the world’s most relevant thought leaders and industry decision makers from the intersecting worlds of finance, politics, public policy, science, and philanthropy.” says Scaramucci.
SkyBridge views SALT as being independent from, but complementary to, the investment side of the business. “SALT has evolved from a hedge fund conference into a forum for alternative thinking,” confirms Scaramucci. “The program is designed to facilitate meaningful discussions and balanced debates on the world’s most relevant and controversial issues, while identifying strategies and solutions that allow us [investors] to capitalise on opportunities for the year ahead.”
Scaramucci is supporting Republican Presidential candidate Jeb Bush, but of course the hedge fund industry contains plenty of prominent Democratic supporters as well: including Renaissance
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Technologies founder Jim Simons,
D.E.Shaw founder David E. Shaw, and Avenue co-founder Marc Lasry. “The goal behind SALT, and Wall Street Week, is to personalise and humanise the alternative asset management and add personality to stories such as that of Lee Cooperman” says Scaramucci. Growing up in the South Bronx, Cooperman is now a billionaire who has signed up to the Warren Buffet pledge to bequeath most of his money to charity. “He is vilified as politicians want to pit haves against have nots, which is anti-American and against the way we grew up” frets Scaramucci. These personal narratives bring the industry to life and Scaramucci is naturally also pleased to see SALT raising the public profile of SkyBridge.
Dynamic and Tactical Strategy Reallocations Funds of hedge funds’ performances were historically often attributed to the strength of their rolodexes, but the notion of selling access has become as outdated as the rolodex itself; younger readers who exchange electronic business cards might not even know a rolodex is a contacts list. “As transparency and openness have increased, the access argument fell by the wayside” argues Nolte. SkyBridge differentiators include the team’s ability to “invest and take risk more like a multi-strategy fund and tactically shift exposures around”. But Nolte would not want to be restricted to ten or so internal teams as he wants a broader palette from which to craft the portfolio each month. “We are always thinking about where the incremental next dollar should be invested over the next three to six months, and constantly refreshing our portfolios” he says.
SkyBridge has made shrewd strategy allocation choices. Cash-flow generating strategies, including prepayment- sensitive mortgages and corporate credit, have made substantial contributions to SkyBridge performance since 2009, and in 2009- 2013 at as much as 80% of the book was in various ‘coupon clippers’ that were priced to factor in larger default losses, or mortgage prepayments, than occurred. Most of the collateral backing SkyBridge’s cashflow-generating investments revolves around mortgages, and specifically the poster children of the credit crisis: older, pre-crisis, loans, including alt-A, sub-prime, and option ARMs. “This paper has now aged, with good cash-flow, low credit risk, and better collateral as home price appreciation has helped and equity tranches have taken a hit leaving mezzanine and senior tranches looking relatively safe and offering attractive cash-flows of 15% or more” Nolte judges. Though big picture themes can receive large weightings, they are diversified through specialist sub-strategy managers. SkyBridge’s major call on mortgages between 2009 and 2011 was expressed through “spread trading, new issuance, and jumbo prime loans, which all have some commonality but different correlations” Nolte recalls.
If ‘rebalancing’ often implies tinkering around with over-weight and under-weight tilts towards or against particular strategy, ‘reallocation’ better describes SkyBridge, which is in the business of wholesale shifts in allocations. As well as making contrarian calls on credit and mortgages post-crisis, Nolte swam against the tide of consensus investors by virtually eliminating two directional strategies that garnered strong inflows following their robust 2008 performances: macro and CTAs. Having had plenty of macro and managed futures exposure in 2008, Nolte had exited by June 2009 and has only just started re-entering these tactical trading approaches with a 4-5% weighting, which is small by SkyBridge standards as the manager can go up to 40% in one strategy, and owns far fewer than the fifty or so managers some advisers are exposed to. Nolte has established a toehold in macro and CTAs because he thinks “when rates start to turn in 2016 to 2017 that’s positive for those spaces”. SkyBridge also argues that divergence between normalising Fed policy and QE-driven ECB and BOJ policies could be good for macro. And reflecting on his 30 years’ of experience in finance, Nolte reads the number of managers throwing in the towel and closing down funds as positive because, “when you get these flush-outs it’s a sign you are getting closer to the bottom”. That applies to discretionary commodity traders just as it does to macro funds.
Tactical equity and event exposure Though SkyBridge has had little or no exposure to external macro managers post-2008, SkyBridge itself has been making tactical macro calls on
December 2006 †December 2007 December 2008 December 2009 December 2010 December 2011 December 2012 December 2013 December 2014 June 2015
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