47° North New Generation Fund: 47° North Capital Management

Best Performing New Fund of Hedge Funds: Winner

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The 47° North New Generation Fund launched in March 2009 to offer investors access to a diversified portfolio of early stage hedge fund managers spread over different investment strategies.

It seeks to benefit from higher risk-adjusted returns through exposure to early-stage managers and smaller funds with shorter histories than those usually attractive to funds of hedge funds.

The underlying funds typically have assets under management of less than $500 million and track records of less than three years at the point of investment. Early-stage does not mean that the manager is inexperienced - rather that they have recently launched a hedge fund to capitalise on their expertise and experience.

"47° North investment team members have focused on emerging managers and specialised portfolios for longer than anybody we know of. An exceptional depth of experience and knowledge regarding the crucial factors that drive investment decisions in the early-stage hedge fund sector has been developed," says Claude Porret, chief executive officer.

Given the nature of the fund and the investment universe it covers, the 47 Degrees North team has developed an ability to analyse limited track records, recognise style drift and identify risk in new operational setups.

Whilst understanding the dynamics of new teams, 47° North has no qualms about tough bargaining. "It also means being able to take advantage of the benefits of early stage investing such as the possibility to negotiate terms, position transparency, side letter benefits, superior returns and involvement in innovative profitable strategies," says Porret.

Target clients for 47° North's products are sophisticated institutional investors, mainly comprising of pension funds, insurance companies, banks and large corporations. Currently, over 80% of the assets under management are from institutional investors.

As a company, 47° North is a relative newcomer, but it has plenty of pedigree behind it. It launched in 2006 with a team of veteran capital markets professionals at the helm. The emphasis is on identifying early-stage managers, innovative strategies and thematic hedge fund investments.

"Members of the 47° North team have performed due diligence on hundreds and invested in dozens of early-stage and other specialised hedge fund managers," says Porret.

The team headed by Porret, Fraser McKenzie and Richard Mueller, has impressive credentials. Between them, they researched and seeded one of the first power hedge funds trading in the Swiss and German electricity markets. They put together the first weather hedge funds and one of the first carbon trading vehicles. They also seeded one of the first securitised insurance risk funds.

Members of the 47° North team also ran one of the first institutional emerging manager and seeding vehicles in the hedge fund industry while at RMF, gaining broad experience in sourcing and investing in early-stage hedge fund talent across all strategies.

The firm achieved its first significant success in April 2007 through the launch of an emerging manager fund seeded by the California Public Employees' Retirement System (CalPERS). It was one of just three successful applicants out of a field of 97. At the beginning of 2009, 47 Degrees North brought Iveagh (Guinness family office) and CalPERS in as strategic partners and minority shareholders in the company.

FUND FACTS: 47° NORTH NEW GENERATION FUND

Full name of fund: 47° North New Generation Fund
Name of investment/management company: 47° North Capital Management
Contact: Dr. Richard C. Mueller, Churerstr.77, 8808 Pfaeffikon, Switzerland (+41 55 645 00 00; richard.mueller@47n.com)
Launch date: March 2009
Assets under management: $15 million
Annualised return: 12-15% (target)
Annualised volatility: 6-8% (target)
Strategy: emerging managers
Share classes: US dollar, share class A and B
Administrator: Citco Fund Services
Auditor: KPMG
Custodian: Citco Global Custody
Domicile: Cayman Islands
Management fee: share class A: 1.5%; share class B: 1.25%
Performance fee: share class A: 15%; share class B: 10%
Minimum investment: share class A: $ 100,000; share class B: $1 million
Lock-in/up: none
Redemption period: quarterly with 95 days notice

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