Albourne's Simon Ruddick discusses firm's humble origins
From its first office behind a butcher shop to London digs near Buckingham Palace, Albourne Partners tries to keep it simple, fun
From humble beginnings in an office behind the butcher's shop in the English village of Albourne, Albourne Partners Ltd. has grown in the past 17 years into the world's largest dedicated alternative investment consulting firm, advising some of the world's largest institutional investors on direct investment in hedge funds, private equity and real assets.
Snapshot
Spike Liseiko
Simon Ruddick
- Current position: Managing director, co-founder and CEO, Albourne Partners Ltd., London
- Assets under advisement: $300 billion in direct investment in hedge funds, private equity and real assets as of Aug. 31.
- Investment consulting clients: 200-plus
- Size of investment consulting staff: 205 total/135 analysts
- Age: 50
- Education: M.A. in philosophy, politics and economics, Trinity College
- Personal: married, three children
- Personal interests: ballroom dancing
- Charitable and board work: trustee of the Hedge Fund Standards Board; member of the investment committee of Trinity College
The company was co-founded by managing director and CEO Simon Ruddick, who got his start working for Japanese investment banks as a derivatives trader in the early 1980s. After heading up Bankers Trust Co.'s Tokyo equity derivatives business, the bank moved Mr. Ruddick to London in 1988. In 1989, he left to form specialist equity derivatives boutique Westminster Equity Ltd.; Mr. Ruddick sold his share in 1994. Together with Guy Ingram, another Westminster Equity partner, Mr. Ruddick launched Albourne Partners as a specialist hedge fund consulting firm in March the same year.
Based for many years now in London, a recent move to new offices near Buckingham Palace reinforced Albourne's image as a serious consulting firm, committed to remaining independent. But the posh new digs belie the sense of fun the firm has embraced since its earliest days, buoyed to a great extent by Mr. Ruddick's own good humor.
Annual client conferences, for example, focus on such weighty subjects as the state of the global economy and optimal hedge fund portfolio construction, but they always include an element of the absurd.
The November 2010 conference, “Hedgegate,” was held in Washington on Election Day. Because client demand for conference spaces was so heavy, the firm's tongue-in-cheek catch phrase was “break in, if you have to.” The 2008 “Escape to Alphatraz” event featured dinner served on metal prison plates on Alcatraz Island. And Albourne's Hedgestock fundraiser and networking extravaganza brought a hippy revival to the English countryside in the summer of 2006 that the hedge fund world still is reminiscing about.
The Albourne's website is unique in the investment world. Harkening back to Albourne's modest beginnings, the site visually resembles the company's namesake village in Sussex. The website includes hedge fund news and gossip (found at the virtual village pub), a data farm and a hedge fund mall, where hedge fund managers may set up shop and peddle their wares. The website is phenomenally popular and has more than 80,000 members. Mr. Ruddick joked in conversation that albournevillage.com has the highest gross domestic product in the world.
When Mr. Ruddick isn't traveling the world consulting with clients or persuading regulators to adopt standardized hedge fund risk reporting protocols, he and his wife share a passion for ballroom dancing.
How did you get into money management, specifically hedge fund management? From 1989 through 1994, I was the 50% shareholder in a derivatives shop called Westminster Equity. We did two different things. We managed liabilities on a performance basis which came from option-linked structured products. It was from there that we became hedge fund managers.
We got discovered by Frank Meyer (founder of Glenwood Capital LLC) who, by the way, got Kenneth C. Griffin (now CEO of Citadel LLC) to do some due diligence on us. He then introduced us to Paloma Partners (LLC)'s S. Donald Sussman and Mark Jurish. We became captive hedge fund traders to Paloma. Paloma pretty much created the European hedge fund scene. The other big American (multistrategy managers) weren't really looking for European-based traders.
How did you move from hedge fund manager to consultant? It wasn't actually our idea. It came from a very good friend, Bill Fung, an academic at the London Business School, who specialized in hedge fund research. Various investors had approached him back in March of 1994 saying they wanted his help in building their hedge fund portfolios. I knew Bill from my Bankers Trust days, and he contacted myself and Guy Ingram for assistance with a small consultancy that he had set up.
So we started off by doing exactly what we do now, research on hedge fund portfolios, particularly market risk in hedge fund portfolios. We were doing that in March of 1994 for institutional investors that already had grown out of funds of funds.
At first, we were helping Bill with his clients, but he decided to go off and do something different, so we started taking on clients of our own.
How did you find clients? To be honest, for the whole 17 years, most of our clients have come from referral, really by word of mouth.
We absolutely do have people who help us win new clients now. We don't particularly persuade people to invest in hedge funds or particularly persuade them to go direct (instead of through funds of funds). When investors have reached those conclusions, they tend to come and find us.
Please describe your business model. Has it evolved over time? It really hasn't changed over the years.
Since the beginning ... we've always believed in a fixed fee model, and we sought a long-term, equilibrium price. Effectively, over 17 years, (we haven't) changed the price.
The price for accessing all of our research via the universal contract is $400,000 per year. That price has never changed. The universal offering offers depth and breadth with access to all of the managers we cover. If you are managing multiple hedge fund portfolios with different themes, you may want the universal service.
The lower priced, standard contract is for clients with one hedge fund portfolio. We give you all the depth we think you will need to manage that portfolio. (The price of) our standard service did rise from £10,000 per month more than 10 years ago to $240,000 per year, but that was more because of currency fluctuation. We decided to switch the fee to the comparable U.S. dollar figure and it's stayed there.
Unless hyperinflation comes back, we don't anticipate having to change the pricing.
Why is Albourne Partners so insistent on offering a fixed price service? We are absolutely wedded within the firm to the fixed fee model, crucially because we think it takes away a long bias in your advice. If you charge in basis points, there's got to be an incentive to keep recommending more of everything. That doesn't work for us because we need to be able to tell investors when to get out as much as when to get in.
And we will never take discretion for the advice we give about investing in a hedge fund manager. We feel that it's very important to preserve that line between (discretionary) and non-discretionary advice on managers.
How does Albourne stay abreast of the tremendous movement in the hedge fund industry? Many consultants operate what I call a “positive list,” i.e., they come up with a small list of funds and tell their clients to choose from it. We don't. Clients can come to us and ask us to go and look at a new fund. That's a tough business model. It means that your economies of scale come later, but when you get there, it's a more defensible position.
We have hedge fund managers contact us directly because, as we describe it, we bask in the reflected glory of our clients. Because we have great institutional clients, the best and brightest (hedge fund managers) go to them and then the client has us take a look. It results in a positive selection bias.
— Contact Christine Williamson at cwilliamson@pionline.com
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