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February 01, 2005 at 07:00 PM
NEW YORK (HedgeWorld.com)–Banks, traditional money managers, insurance companies and private equity shops all have served as hedge fund launching pads or host organizations. Less noted is the role of some business consultancy firms in creating hedge fund operations.
The advantages of a connection to a larger organization, whether it be a bank or a business consultant, are myriad. Besides providing access to ready-made services such as computer expertise and legal counsel, the institutional structure reduces business risk for a fund. Perhaps even more important, skills and experience gained in other areas can add savvy to the investment process.
Cambridge, Mass.-headquartered Monitor Group is a case in point. A company with business consulting and investment management arms, Monitor advises Fortune 500 corporations on matters such as product and pricing strategies and sales development. Started in the 1980s by a group that includes Harvard Business School professors, it now employs 1,000 people in about 30 offices around the world.
The firm formed a merchant banking unit in 1998. That year, it raised its first buy-out fund and opened a hedge fund, a low-volatility long/short equity vehicle that was closed to new investment in 2004.
Industry sources say Monitor now is starting a second hedge fund, again long/short but with a long bias and a focus on small-cap stocks, to be run by the same portfolio manager.
A Shared Perspective
Following a nautical theme, the hedge fund management business is called Monitor Vela–Italian for sail. The investment approach emphasizes the study of company fundamentals through interviews as well as data analysis and checks with the group’s contacts.
