Hedge fund managers that stopped taking money from new investors in some strategies because they can't put the huge cash flows to work are resorting to the long-only world.
By simplifying trading and adapting their investment processes to avoid leverage, hedge fund managers — especially those with a quantitative bent — are hoping to diversify their client bases with more stable long-term assets from institutional investors. Hedge fund managers also hope long-only strategies will relieve them from the burden of seeking alpha in markets where competition makes good shorting ideas a scarce commodity.
Some of the firms are:
• Lone Pine Capital LLC, which is launching a group of long-only funds in January;
• D.E. Shaw & Co. LP, which is starting to market an enhanced index strategy benchmarked to the S&P 500 index; and
• Norshield Investment Partners Inc., which is adding a long-only twist to its existing strategy.
Lone Pine, Greenwich, Conn., founded by Tiger Management alumnus Stephen Mandel Jr., is launching the long-only funds primarily to cope with its own success. Mr. Mandel started the firm in 1998, and industry estimates put its assets under management around $6 billion.