PRINT THIS PAGE Institutional Investor Profile: Salomon Konig, Managing Member and CIO, Artemis Capital Partners03/06/2008. Source: AltAssets.
Salomon Konig on the importance of a diverse portfolio, on quantitative due diligence, on the dangers of an over-correlated market and on the rise of capitalism. Artemis Capital Partners was established in 2006 by Don Kurz and Salomon Konig to handle the alternative portfolios of family offices. The firm has offices in Aventura, Florida and Los Angeles, California.
Konig has 30 years of finance and investing experience in the US and Latin America. He is a member of the board of directors of The Hedge Fund Association.
How many funds of funds do you manage?
'We currently have two structures; both are portfolios of funds of funds. One is an offshore structure called 3MF Artemis Fund (BVI), and the other one is an onshore structure called 3MF Artemis Fund (US).'
What is the focus of the funds?
'The portfolio has a simple philosophy: find the most robust, low volatility, consistent and diversified portfolio and then focus on the appropriate leverage in order to maximise risk-adjusted returns.
The Artemis portfolio is one year old, though our investment groups have been investing in single managers and funds of funds for up to 20 years. The aim is to create an ultra-diversified portfolio in such a way as to be able to leverage it maintaining low risk.'
Who are your investors?
'Family offices and private banks from regions and countries including Southern California, New York, Florida, Switzerland and South America.'
What is your average investment?
'Our investments in the funds range between $2m and $5m.'
How do you find out about good investment opportunities?
'We have a database of about 14,000-15,000 funds. We keep adding funds to our database from our continued contacts in the industry.
The investment opportunities come from a very broad spectrum of contacts.'
How do you conduct your due diligence?
'Initially, we perform a quantitative analysis. This is based on three filters that we do, which have various levels of selection criteria always maximising consistent returns and low volatility. We filter the funds from 15,000 down to 100 funds using sophisticated software and processes.
We then proceed to due diligence, on an individual basis, looking at the qualitative operations and analysis of leverage and risks of the underlying funds. This brings the universe of possible funds down to approximately 50 funds. We then filter one last time based on benchmark analysis such as tracking errors, special correlations and information ratios. We then complete the final stage in our due diligence process, which is face-to-face meetings with the selected funds' managers.'
How many funds do you have in your portfolio at the moment?
'Our offshore structure consists of a portfolio of 17 funds of funds and one multi-strategy fund; our onshore structure is a portfolio of 11 funds of funds.
Overall, through our investments have exposure to about 300 hedge funds, 100 of which are closed to new investors, across most all strategies and geographies such as emerging markets, arbitrage, stable return, low volatility, etc.'
Can you mention a couple of funds in your portfolio?
'We have included in our portfolio some specific funds from Silver Creek and Sandalwood.'
Do you ever invest in emerging managers directly?
'We invest in first-time managers only through a small allocation in a diversified funds of funds specialist in this area. We currently have made some investments in emerging managers in this way.'
How do you think the hedge fund industry will evolve over the next few years?
'I believe that in the US there is still great growth to come, specialising in sectors such as technology, healthcare, real estate, clean energy and alternative energy, as well as utilities and infrastructure. The countries that seem to be gaining traction, with somewhat higher risk, are countries in Asia, the BRIC countries and with even higher risk, there are some small opportunities appearing in the frontier countries such as Indonesia, Middle East and some countries in Africa and Latin America.'
What are the pressing issues the hedge fund industry is facing?
'I would say correlations. There is a major problem with correlations in all investments. I think the proliferation of structured products linking every possible relation between one investment and another is making the correlations higher and higher.
The second issue is almost a consequence of the first and that is the large supply of capital, increasing the allocations to funds. Because of this, the opportunities are becoming less profitable (less spread or less mispricing in developed liquid markets). I would say that those are most immediate problems.'
Are there any new investment vehicles that you plan to invest in the future?
'From the traditional financial industry employees, there will be more defectors who will exploit their specialty through hedge funds and private equity funds. Some vehicles will be very illiquid but there is going to be an explosion of growing market of listed private equity vehicles.'
In what parts of the world will this industry prosper?
'The economic development is already worldwide phenomenon and will continue with some cyclicality. I am certain that money will continue to be invested in all countries mostly developed or newly developed but there will be some very small portion invested in what we now call 'Frontier'. However, the more institutionally developed a country gets, the higher the level of opportunities it creates.'
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