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Presenters: Marcos Pinto, Partner, Gávea Investimentos Sebastian Echavarria, Managing Director, Highbridge Capital Management
Overview of Relationship
Initial Gains Challenges Evolution of Hedge Fund Industry
Overview of Relationship 2 .
P. Morgan formalized Asset Management business established J.P.Highbridge: Evolution of a Global Alternative Investment Management Organization Quantitative Global Macro Mezzanine Debt Japanese Convertible Arbitrage Event Driven (Focus on Merger Arbitrage) 1994 1995 1996 European Convertible Arbitrage & European Event 1997 1998 1999 2000 Event broadened to include Relative Value Long/Short Equities Quantitative Commodities Leveraged Loans & High Yield Liquid Loan US Convertible Arbitrage Statistical Arbitrage Asian Equities Louis Dreyfus / Highbridge Energy 2006 2007 Growth Private Equity Credit Opportunities 1992 1993 2001 2002 2003 2004 2005 2008 2009 2010 2011 Inception of Highbridge Capital Management Inception of Dubin & Swieca Asset Management London office established Hong Kong office established Tokyo office established Principal Strategies Group established $27 Billion AUM(1) 473 Employees Strategic partnership with Gávea established $1 Billion AUM 47 Employees $2 Billion AUM 51 Employees $5 Billion AUM 142 Employees Strategic partnership with J. Morgan completes purchase of Highbridge 3 .
2011. (1) Includes Multi-Strategy allocation of ~$890mm to HPS funds (2) Includes comingled funds.7 Total $10.9 4. 2011 unless noted.1 0.3 0.3 $7. HCM does not have investment discretion over the assets managed by Gávea.2 While HCM has certain governance and information rights regarding the operations of Gávea.7 $6. Includes Multi-Strategy allocation of ~$200mm to Gávea Fund.4 0.8 1.0 Global Alternative Asset Manager $28bn AUM Leveraged Loan Partners Credit Opportunities Total Asset Management Business AUM ($bn) Market Neutral Funds Mutual Fund UCITS Long-Only Equities Quantitative Commodities Total $2.2 Mezzanine Liquid Loan Opportunities2 Senior Loan II Constellation Growth Equity Principal Strategies Business1 AUM ($bn) $2.5 0. Includes $1.Highbridge today Hedge Fund Business AUM ($bn) Highbridge Multi-Strategy Long / Short Equity Statistical Arbitrage Quantitative Commodities Global Macro $6. (3) As of May 1.5 Gávea3 AUM ($bn) Hedge Fund Strategies Longer Dated Funds Total $2.3 1. Note: All figures as of May 23.5 1.6 1. and HCM provides back office services for Gávea.1 0.4bn of closed commitments for GIF IV.7 $5.3 1.3 2.9 1. 4 .1 0.
risk management and operations. • GIF’s investment approach is focused on identifying best-of-class partners and attractive businesses.2 billion in assets under management. Gávea has been one of the largest and most active participants in the private equity industry in Brazil and has a strong track record. trading. • • Gávea maintains a dedicated private quity group (Gávea Investment Funds or “GIF”) comprised of 27 professionals led by Luiz Fraga and Christopher Meyn.Overview of Gávea • Gávea was co-founded in August 2003 by Arminio Fraga and Luiz Fraga. Gávea is currently one of the largest Brazilian alternative investment managers with approximately US$ 7. macro and micro analyses. To date. 5 . focused on two business lines: hedge funds and private equity. who lead an experienced team of professionals across portfolio management. Gávea has offices in Rio de Janeiro and São Paulo (Brazil). then working closely with them over the long-term to design and implement value-creating strategies. with a total staff of 104 as of December 2010. the group has completed 34 transactions.
including all investment decisions 6 .Overview of Relationship 55% ownership of Gávea through JPM Strategic partnership with HCM Long-term commitment by both sides increases chances of success Certain oversight functions such as compliance Access to HCM infrastructure and fundraising capabilities Gávea retains day-to-day independence.
CFO Portfolio Management HPS Scot French Mezzanine Debt Subu Venkataraman Chief Risk Officer Mark Vanacore Convertible & Volatility Arbitrage Jan Faller Deputy Chief Risk Officer John Oliva Chief Compliance Officer Jim Glynn Chief Financial Officer Mike Patterson Senior Loan Catherine Vaughn Deutsch Global Head of Asset Management & Investor Relations Amy Yates Head of Human Resources Faith Rosenfeld Chief Administrative Officer. Operations & Technology Christopher Hayward Management Co. Compliance & HR Noah Greenhill General Counsel Finance. Highbridge Principal Strategies HPS Investment Committee Scott Kapnick Scot French Mike Patterson Purnima Puri Faith Rosenfeld HCM Executive Committee Glenn Dubin Todd Builione Scott Kapnick Christopher Hayward Mary Erdoes Arminio Fraga Amaury Bier Portfolio Management HCM Alec McAree Fundamental L/S Equity Risk Management Business Development & Investor Relations Mark D’Andrea Global Head of Institutional Business Development Legal. HPS Purnima Puri Credit Opportunities Evan Dick Statistical Arbitrage Alain Sunier Statistical Arbitrage Sebastian Echavarria Global Head of Family Offices & Bank Platforms Serge Adam Credit Opportunities James Jordan Director of Finance & Treasury Cliff Friedman Growth Equity Sassan Alizadeh Global Macro Jeff Holman Global Head of Product Strategy Marc Creatore Head of Operations David Frey Liquid Loan 7 .Highbridge Management Structure Glenn Dubin Co-Founder Chairman & Chief Executive Officer Todd Builione Managing Partner President & Chief Operating Officer HCM Investment Committee Glenn Dubin Todd Builione Arminio Fraga Alec McAree Alain Sunier Mark Vanacore Subu Venkataraman Jeff Holman Scott Kapnick Managing Partner CEO. Regulatory .
Co-CIO. Longer-Dated Investments Hedge Funds Investment Committee Arminio Fraga Gabriel Srour Edward Amadeo Bernardo Meres Paola Bonoldi André Monteiro Longer-Dated Funds Investment Committee Arminio Fraga Luiz Fraga Christopher Meyn Piero Minardi Carlos de Barros Helio França Eduardo Soares Gabriel Srour* Co-CIO. Brazil Felipe Diogenes* Global Macro Research Franklin Lima P&L Manager Carlos de Barros* Portfolio Manager Mauricio Magalhães* Head of Operations Marcos Stein Equities Trading.Gávea Management Structure Arminio Fraga* Co-Founder. Chief Operating Officer Daniel Tonholo Risk Manager Piero Minardi* Portfolio Manager Bruno Carvalho FX and FI Trading. Longer-Dated Investments Bernardo Meres* FX and FI Trading. Global Paola Bonoldi* Head of Equities Research Eduardo Rudge* Chief Financial Officer. Chairman and Chief Investment Officer Luiz Fraga* Co-Founder. Global Carlos van Hombeeck Global Macro Research Helio França* Portfolio Manager Rodrigo Musse Administration / Finance Andrei Spacov* Brazil Research Marcos Pinto Portfolio Manager Flavio Ferreira General Counsel Eduardo Soares* Head of Investment and Fund Structuring Rodrigo Fiães* Head of Business Development and Investor Relations 8 . Hedge Funds Edward Amadeo* Chief Economist Amaury Bier* Chief Executive Officer André Monteiro* Chief Risk Officer Christopher Meyn* Head Portfolio Manager.
Strategic Rationale 9 .
and in particular Brazil Gávea’s investment strategies and expertise complement those of HCM and add world-class macro and private equity insight in emerging markets to our investment process Continued institutionalization of Gávea Benefit from the global resources of Highbridge and J.P.Strategic Rationale Partnership deepens J. Morgan 10 . Morgan’s presence in Emerging Markets.P.
Partnering Locally with a Long-term Commitment Acquiring a local partner is the most effective way to enter a new market. expertise and relationship from scratch Blackstone and others are entering in similar manners Requirements for Key Partners to Remain with Firm Long-term Significant Capital Invested by All Partners Expanded Knowledge Base Provided by Local Expertise and Market Know-How Increased Fundraising Capacity Improvement of Overall Client Service Arminio Fraga Neto Founding Partner. Chairman Gávea Investimentos Glenn Dubin Co-Founder. especially emerging markets It is impossible to create this team. CIO. CEO. Chairman Highbridge Capital Management 11 .
Initial Gains 12 .
6 billion for Gávea Investment Fund IV (GIF IV) – largest Brazil-Focused Private Equity Fund – – – Successfully diversified geographical investor base Diversified overall investor profile Capital for GIF IV was raised in less than 9 months New deal flow stemming from relationship with HCM and JPM Significant improvements in infrastructure and other key areas 13 .Initial Gains Helped raise $500 million for Gávea Macro Hedge Funds – Increased Hedge Fund AUM by 30% Helped raise $1.
Initial Challenges of the Relationship 14 .
and new relationships – Solution: Strategic relationship with Highbridge was key as they underwent the same process when JPMorgan acquired them in 2004 What would you do differently? Too Early to say….What were the challenges? Issue: Providing comfort to existing clients regarding the transaction – Solution: Constant communication with clients about the nature of the transaction Educating clients that the transaction does not affect day-to-day investment decisions Informing clients of the benefits of the new platform Issue: Reassurance of management's commitment to the business – Solution: Seamless communication with partners and employees Significant cross investments Implementation of long term agreements and incentive plans for partners Issue: Integration of teams. 15 . infrastructure.
” “intend.” “will. change or supplement in the sole discretion of Highbridge Capital Management. product. The strategy described may not be suitable for all investors.” “continue” or “believe.” “project. The methodology used to aggregate and analyze data may be adjusted periodically. LLC (“HCM”) or Highbridge Principal Strategies. recommendations to buy or sell. and (3) any taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax advisor with respect to any federal tax transaction or matter contained in this communication. Due to various risks and uncertainties.” “anticipate. (1) nothing contained in this communication was intended or written to be used. and has not independently verified the assumptions on which such information is based. The performance results of certain economic indices and certain information concerning economic trends contained herein are based on or derived from information provided by independent third party sources. actual events or results may differ materially from those reflected or contemplated in such forward-looking statements.” “estimate. service or fund. Highbridge believes that such information is accurate and that the sources from which it has been obtained are reliable.” or the negatives thereof or other variations thereon or comparable terminology. however. and together with HCM. Highbridge has made assumptions that it deems reasonable and used the best information available in producing calculations above. or may be relied upon or used by any taxpayer for the purposes of avoiding penalties that may be imposed on the taxpayer under the Internal Revenue Code of 1986. can be used by any taxpayer. (2) any written statement contained on this communication relating to any federal tax transaction or matter may not be used by any person to support the promotion or marketing or to recommend any federal tax transaction or matter. References to specific securities and asset classes are for illustrative purposes only and are not intended to be. LLC (“HPS”. Highbridge cannot guarantee the accuracy of such information. All information provided herein is as of the date set forth on the cover page (unless otherwise specified) and is subject to modification.” which can be identified by the use of forward-looking terminology such as “may. Certain information contained in this material constitutes “forward-looking statements. it does not purport to capture all trades or all dimensions of risk.” “should.Disclaimer This material is for information purposes only. is confidential and may not be reproduced or distributed except as otherwise provided herein. IRS Circular 230 Disclosure Unless expressly stated otherwise. and should not be interpreted as. The information is not intended to provide and should not be relied on for accounting or tax advice.” “expect. Past Performance is not necessarily indicative of future results. The results of previous analyses may differ as a result of those adjustments. “Highbridge”) without notice to you. as amended. This material does not constitute an offering of any security. While this summary highlights certain examples. 16 .
Evolution of the Hedge Fund Industry 17 .
18 .Evolution of hedge fund investors The client base has become increasingly institutional 1998 14% Institutional Institutional 14% Corporate Balance Sheets 9% Corporate & Public Pensions 15% 2004 33% Institutional E&Fs 6% SWFs 3% 2010 61% Institutional E&Fs 6% Corporate Balance Sheets 9% SWFs 6% High Net Worth 67% High Net Worth 86% Corporate & Public Pensions 40% High Net Worth 39% $370 billion $1 trillion $2 trillion Source: Prequin. SEC. The Bank of New York Mellon and Casey Quirk.
19 .Emerging paradigm The way investors think about hedge fund strategies is evolving Old Allocation Framework 60 / 40 Old School Paradigm New Allocation Framework Equity (L/S. Core+) Alternatives Fixed Income Source: Casey Quirk. Long Only) Equity Real Estate & Commodities Beta (ETFs & Passive Indices) Global Macro & Market Neutral (Liquid Alpha) Private Equity & Distressed (Illiquid) Credit (L/S. High Yield. The Bank of New York Mellon.
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