09/11/17

Wall Street hedge fund veteran hits highs with copycat tactics

(Financial News) -- A Wall Street veteran who has made big returns for wealthy clients by piggybacking on the strategies of well-known hedge funds is taking his novel approach to stock-picking to institutional clients.

Dixon Boardman, chief executive of $2.5bn fund of hedge funds Optima Fund Management, picks investments for his Star fund by tracking regulatory filings made by 10 big hedge fund managers about their stock holdings. He then applies their five highest-conviction trades to its own portfolio.

The system means the Star fund, which launched last year, is three months late in and out of each trade, as the Securities and Exchange Commission requires hedge funds to disclose positions on a quarterly basis.

However, the delays do not appear to have hampered returns. The fund was up around 27% in late October, according to a person familiar with its performance. That means it is comfortably outperforming the wider hedge fund industry, which delivered an average return of 4.59% for the year to October 31, according to HFR data.

Some of the world’s richest individuals have invested around $100m in the Star fund and Boardman told Financial News he is now marketing it to institutional investors in the US and Europe.

Boardman declined to name any of the 10 managers whose positions are being copied by his fund, but admitted most of them are unaware of his strategy.

Investors in the fund pay a flat fee of 1% each year, less than the "2 and 20" model traditionally offered by hedge funds, under which investors pay a 2% management fee and 20% on performance.

Boardman is a veteran of the New York fund of funds industry, having founded Optima in 1988. He has been an early investor in some of the world’s biggest hedge fund managers, including Paul Tudor Jones, founder of the Tudor Investment Corporation, and Bruce Kovner, who set up Caxton Associates.

He also made early commitments to Louis Bacon’s Moore Capital and Alan Howard’s Brevan Howard Asset Management, which went onto become, at one point, the world’s biggest macro fund.