By Lawrence Delevingne and Svea Herbst-Bayliss
LAS VEGAS (Reuters) - A hedge fund industry gathering in Las Vegas this week was far less decadent than those of the past, as big money investors focused less on gambling and champagne-soaked "Sin City" celebrations and more on the grind of vetting fund managers.
After years of underperformance that have humbled hedge fund managers, investors welcomed the more sober approach at the Context Leadership Summit, said Michelle McCloskey, who helps construct portfolios of hedge funds as Man Group's President of the Americas.
"It’s not such a party atmosphere anymore" she said in an interview, "which is far better aligned with the preferences of most institutional clients."
Instead of Anthony Scaramucci's splashy SkyBridge Alternatives Conference -- which featured celebrities, rock concerts and pool parties -- investors attended a new, subdued gathering. It was organized by Context Summits, best known for "speed date" events where investment executives who choose hedge funds for wealthy families and funds of funds quickly grill managers about their track records, investment strategies and risk-management practices. In spare, curtained booths in an Aria Resort and Casino ballroom, investors could meet with private debt specialist Direct Lending Investments, non-performing loan-focused Legacy Capital Group, corporate event-focused Paulson & Co and cryptocurrency expert Pantera Capital, among others.
The industry’s performance has turned a corner lately, with the average hedge fund rising 0.4 percent this year, beating the slumping Standard & Poor's 500 Index for the first time in years, according to Hedge Fund Research.
"Now people are seeing hedge funds as a diversifier and not as a substitute to what they already have in the portfolio," said Lionel Erdely, chief investment officer for alternatives at $22 billion Investcorp Group.
With market volatility and stock price dispersion expected to pick up, analysts and investors said hedge funds are starting to look more attractive, particularly smaller managers with niche strategies.
Erdely said he likes funds that invest in non-performing loans, particularly from Italy. Jeff Assaf, chief investment officer of $4 billion ICG Advisors, recommends private credit strategies, which typically pursue borrowers banks avoid.
SALT-LITE
Las Vegas was for years the $3.2 trillion hedge fund industry's party venue of choice. The epitome was Scaramucci's "SALT" event with billionaire managers like Steven A. Cohen, Paul Singer and Kenneth Griffin.
That event was canceled this year for the first time since 2009 after Scaramucci briefly joined the Trump administration and tried, unsuccessfully, to sell SkyBridge.
The Context event, created to fill the void, was lower key by design.
"We don't want to ever be viewed as a boondoggle," Context's Ron Biscardi said in an interview. "We’re about a serious business event for our industry." It retained some glitzier elements, including a moderately attended late-night party at Lavo Lounge and a few high-level panels of paid speakers, including former Vice President Dick Cheney, former Defense Secretary and CIA Director Leon Panetta, and former Federal Reserve Vice Chairman Stanley Fischer.
At one networking event, Reuters found clusters of managers wearing color-coded badges, khaki pants and blazers, discussing niche real estate funds and bank lending over beers and sliders.
Context drew an estimated 750 attendees to its Vegas event, less than the 2,000 who flock to its flagship Miami event each January, or the approximately 2,000 who attended SALT.
In an interview this week, Scaramucci said his event will return in May 2019. He will move back to SkyBridge as co-managing partner after the sale to a division of Chinese conglomerate HNA Group fell through in April, although a distribution partnership is planned.
SALT will likely be in Las Vegas again but potentially slimmed down by several hundred people, Scaramucci said. SkyBridge is also considering new concepts for programing, though he expects it to remain a must-attend event for the hedge fund industry.
"The brand is big enough,” he said, “and people want it."