As funding from its major clients – offshore hedge fund-of-funds (FoFs) – continues to dry up, domestic hedge fund Fortitude Capital has begun canvassing ways of garnering more capital from investors in its home market.
John Corr, chief investment officer of Fortitude, said the fund was “looking at a number of possible sales avenues” into the domestic wholesale and retail markets.
The financial crisis has rattled – and in some cases, ruined – Fortitude’s offshore hedge FoF investors, causing its assets under management to shrink from a reported $160 million in September 2008 to $100 million.
The offshore funds, which previously supplied most of Fortitude’s capital, now account for half of it. The remainder belongs to high-net-worth individuals.
Given the retreat of the offshore hedge FoFs, a domestic marketing and business development capability had become attractive, Corr said.
“We’re very concerned about developments in offshore hedge FoFs and are looking at a number of ways of raising our profile locally,” he said.
“But we’re a long way from employing our first sales person.”
Ultimately, Fortitude aimed to engage end-investors who have been served badly by hedge FoFs and other “gatekeepers”, Corr said.
“Some hedge FoFs have proven to be just another layer of fees, and most gatekeepers – hedge FoFs or otherwise – didn’t do their jobs.
“We want to make people aware that there are [managers] who didn’t promise a lot but delivered more.”
The fund, named Hedge Fund of the Year Award at the 2008 Australian Hedge Funds Awards, recently notched 20 consecutive months of positive returns, posting 2.33 per cent for the calendar year so far.
Corr and fellow co-founder Tim McGowen, who resigned in May, established Fortitude in 2005 as a manager focused solely on manufacturing.
“We didn’t want to do a lot of marketing. We thought that if we produced returns, people would find us, and that turned out to be hedge FoFs, who knew market neutral,” Corr said.
The fund is mulling strategies to enter the local institutional and retail markets, but intends to remain in the wholesale sector.