Do More Diligence For Funds Of Hedge Funds, Says Manager

Investors Offshore, New York

26 August 2002

Gary Shugrue, president and chief investment officer of funds of funds company Ascendant Capital Partners LLC, told the Wall Street Journal that investors need to do three and four times more due diligence before getting into a hedge fund than they would with traditional investment products.

"We look for people who can preserve capital when the market is down and able to capture the market when things are good," said Shugrue. "Hedge-fund mangers, in our mind, should deliver absolute returns and that's why you pay those fees."

Ascendant's Strategic Opportunities Fund II declined 1.27% during the second quarter. "We've done very well in a relative sense," Shugrue said. "On an absolute basis, we've done O.K." The fund is registered with the Securities & Exchange Commission, meaning that it has to disclose key operating data, and is thus allowed to accept as little as $25,000 as a minimum investment, although investors still have to have demonstrated wealth of at least $1.5m.

"It is difficult to control risk when you have such a volatile market whether you are long or short," he told the Journal. He doesn't invest with short-only funds because "there are very few people who are good at that."

Shugrue doesn't think hedge-fund managers should stick slavishly to their declared investment style. "We give them leeway," he said, "Our No. 1 request is 'Don't lose money."

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