November 2010 Vol V, Issue 11

Busara Advisors Touts Women-, Minority-Owned HF Database

As more institutional investors begin to look toward hedge fund-of- funds to help build out emerging and women- and minority-owned portfolios, Busara Advisors believes it has positioned itself to be a leader in accessing emerging and undiscovered managers.

The firm has a proprietary database that includes approximately 175 minority and women-owned hedge fund managers. “We spent an incredible amount of time sourcing every emerging/minority manager we could find,” said Joseph Schlater, ceo of the firm. “We just had this feeling, this hunch that they were out there and just not marketing themselves.”

The firm, which is minority-owned itself, is headed by Schlater and CIO Andrew Timpson, one of the co-creators of RBC Capital’s emerging manager hedge fund index. The firm’s senior advisor is Marx Cazenave, a co-founder of emerging manager-of-managers
Progress Investment Management Company.

Schlater said the firm’s focus is on identifying strong firms that are prepared to handle institutional allocations.
“My opinion was this asset class was really alpha generation first and risk management second and that needed to be reversed,” he explained.

“What we have heard from the institutional side is that a great PM does not necessarily make a great business leader,” he said, noting that at a recent conference he heard emerging managers consistently talking about alpha with few mentions of their team, infrastructure and risk management processes.
The firm is currently in discussions with institutions about creating customized portfolios and does not offer a commingled product. “Right now we are in talks with about 3 or 4 state funds about a customized solution that they would like to see out there,” Schlater said.

“We think by specializing, it is a bridge for those pension funds who want exposure to the emerging manager space that don’t really have the ability” to source and vet the firms, Timpson said.

Finding & Evaluating Managers
Timpson said the best way for managers to reach the firm initially is through its Web site, where there is a mailbox address and a general phone number that are monitored by multiple people so that “nothing slips through the cracks.”
Additionally, the firm is also proactive in sourcing firms.

“We have worked very hard over the last 9-12 months really to identify and source as many women- and minority-owned firms as we possibly can,” Timpson said. “I think we have been pretty creative.”

Timpson said ideally managers reaching out to Busara should provide a one page tear sheet and a marketing pitch book that provides basic information on the firm’s structure, its strategy and the performance history of the fund, if applicable.
Additionally, the firm insists on full-transparency from any managers before it will invest.

Reprinted With Permission of Emerging Manager Monthly