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LPL Research Alternative Investment Commentary

John A. Guthery, CFA Vice President, Research ­ Alternative Investment Strategist

2/8/2006

The Torrey Development Fund The Torrey International Fund

The Torrey Development and International Funds are private placement fund of hedge funds that focus on long/short strategies and are available for high net worth clients.

The Torrey Development Fund is a fund of funds, which invests in long/short US equity managers. The managers in the Fund invest primarily in U.S. stocks, establishing both long and short positions, based upon the underlying fundamentals of the companies. The Fund attempts to construct a diversified portfolio of long/short equity hedge fund managers who do not rely on excessive use of leverage or complex derivative strategies. The Fund seeks to identify managers who have a minimum of 10 years' investment experience, generally at larger institutions, but who are in the first several years of starting their hedge funds. The Torrey International Fund is a fund of funds, which generally invests in long/short international equity managers, the majority of whom are located outside of the United States. The managers in the Fund invest primarily in non-U.S. stocks with geographical diversification in Asia, Europe and emerging markets. The Fund's goal is to expose investors to the international equity markets while managing portfolio risk through long/short strategies. The investment goal of the funds is to equal or exceed the relevant performance benchmark after fees, with less risk than the benchmark. For the Development Fund, the goal is to equal or exceed the S&P500 with one-half to two-thirds the standard deviation of the S&P500. For the International Fund, the goal is to equal or exceed the MSCI EAFE Index with one-half to two-thirds the risk of the EAFE. The overall goals of the funds are to: To capture most of the upside in rising markets To outperform in flat markets To preserve capital in declining markets.

Torrey Background:

Torrey Associates, LLC ("Torrey") was founded in 1990. Based in New York City, with approximately $600 million under management, Torrey invests primarily in long/short equity hedge fund managers, generally within the first three years of their hedge fund careers when, in Torrey's opinion, the likelihood of superior performance is greatest. It is this early identification of, and access to, talented hedge fund managers that gives Torrey its competitive edge in the industry. Torrey invests with managers who have solid investment/research backgrounds and proven track records of success in fundamental security analysis and portfolio management. These managers minimize their leverage and derivatives exposure, and invest a sizeable portion of their own capital in their funds. Torrey has a rigorous investment process to identify and select these types of managers.

Investment Process:

Torrey has managed assets with the same core investment philosophy for 12 years. I. Top Down. This means deciding on a geographic allocation for the portfolio. For simplicity purposes, Torrey divides the world into regions that comprise the U.S. (including Canada), Europe, Asia, and emerging markets. This allocation decision is based on Torrey's collective experience investing in the U.S. and internationally for many years. There are a number of variables that Torrey takes into account in this evaluation which include but are not limited to:

Linsco/Private Ledger · Member NASD/SIPC For Broker/Dealer Use Only. Not For Client Distribution

LPL Research Alternative Investment Commentary

John A. Guthery, CFA Vice President, Research ­ Alternative Investment Strategist

a. b. c. d. e.

2/8/2006

Economic and political trends Fund Flows Equity/Fixed income valuations Catalysts for change Strategy options (are there new strategies evolving in the regions i.e. distressed/high yield in Europe or Asia)

II. Bottoms up. This means picking the best 10-15 managers one can find, regardless of the region, which Torrey believes will provide the best risk/reward combination.

Portfolio Construction While the geographic allocation decision is largely top-down, the manager selection process within regions is primarily bottoms-up. The objective is to select managers that Torrey believes are capable of significant alpha either because they have a distinguishable investment edge compared to the competition and/or they are involved in a strategy whose characteristics are well suited to take advantage of market conditions. The Torrey strategy allows a number of different managers with a similarly broad mandate ­ to produce equity like returns - to blend together into a portfolio which Torrey believes enhances the risk/reward ratio, reduces overall risk, and focuses on capital preservation. Identification of Managers---The principals of Torrey average more than 20 years each in the identification and selection of investment managers. Torrey speaks with its current hedge fund managers, clients, contacts in the industry, prime brokers and service providers such as attorneys and accountants. Torrey does not use public databases. Torrey believes its "edge" is finding managers before they are "discovered" by others. Characteristics of Managers--- Torrey looks for managers who have a fundamental approach to investing; no black boxes, trading strategies, or technical approaches. Torrey seeks managers who do not use leverage or use it minimally and who do not make extensive use of complex derivative strategies, since that often masks leverage. The fund also requires that the manager have experience short selling. Due Diligence---Torrey does an analysis of portfolio composition (positions, attribution analysis, and use of leverage, derivatives, and risk exposures). The fund then compares the manager to benchmarks and peer groups. HedgeOps Compliance reviews all financial statements and documents prior to investment. Background checks are done on the principals of the hedge funds with respect to civil, criminal and SEC matters. The Torrey staff calls the manager's references and our own contacts with respect to the manager for third party verification. A Team/Farm Team Approach--- Torrey constructs portfolios to have an "A Team" comprised of those managers with whom we have been invested for over a year and who generally comprise well over half the portfolio. The "Farm Team" is comprised of those managers with whom we are first investing with to see how they do. The Farm Team is essential for the following reasons: 1. There is no better way to get to know a manager than invest with him or her, 2. We can see first hand how they handle the portfolio and have better transparency, and 3. We are able to negotiate capacity. Fee Structure: The Fund charges a 1.5% management fee. The fund also pays fees and performance fees to the underlying hedge funds. The management fee includes a 75 basis point trail to the Advisor. Assets Under Management: The Development Fund has $50 million in assets under management. The International Fund has $280 in assets under management.

Linsco/Private Ledger · Member NASD/SIPC For Broker/Dealer Use Only. Not For Client Distribution

LPL Research Alternative Investment Commentary

John A. Guthery, CFA Vice President, Research ­ Alternative Investment Strategist

Minimum Investment: $250 K

2/8/2006

Suitability: This investment is suitable for Qualified Investors with net worth of more than $5.0 million.

Torrey Management:

Jim Torrey is the CIO and has been investing in hedge funds since 1977. James A. Torrey started the business as a sole proprietorship in 1990. Torrey Associates, LLC was formed in 1998 and registered with the SEC as an investment advisor in 1999. Torrey Associates is also registered with the CFTC/NFA as a commodity pool operator and commodity-trading advisor. Torrey Associates has always been privately held. James A. Torrey owns 100% of the equity. Equity options are also held by a number of key Torrey employees. It should be noted that a newly formed affiliate of Torrey Associates, Torrey Management Associates, LLC, serves as general partner to a number of Torrey's U.S.-domiciled funds and is also registered as an investment adviser with the SEC and as a CPO & CTA with the CFTC/NFA. James A. Torrey also owns 100% of Torrey Management Associates. Torrey Associates and Torrey Management Associates are collectively referred to herein as "Torrey". Rick Cortez is an investment committee member who has himself managed a $500 million portfolio and also run a hedge fund. He and been Vice Chairman of the managers selection group at Prudential and product manager for the outside money manager program at Goldman Sachs. He has 25 years experience. Gretchen Piller has been a portfolio manager at Putnam and at a hedge fund and has 18 years experience. Andrew Finver is an analyst who has been with GE Capital and Valenzuela Capital as an equity analyst. He has 10 years experience.

Risks Although not inclusive, the following list highlights some of the risks associated with this product. For additional information please refer to the Fund's prospectus. · Limited liquidity. Units of the closed-end Fund will not be listed, and as such redemptions will only be available at times designated by the Board, anticipated to be semiannually. Investors should consider the Fund a long-term investment vehicle. Investment Funds not registered. The restrictions and requirement that the Fund must adhere to under the 1940 Act do not hold for the underlying funds. Consequently, transparency, liquidity, valuation procedures, investment-type restrictions, leverage limitations, fees, and performance reporting are limited. Potentially high tax consequences. Despite the Fund not intending to make distributions of net income or capital gains, the tax implications of such will be the investor's responsibility. Tracking error. Because the Fund seeks absolute rather than relative returns, performance could differ significantly from market returns. Although this is favorable in down-markets, investors should be aware that returns will not be comparable to, for example, stock indices in up-markets. Due to the high risks associated with this investment, it may not be suitable for all investors. For information on this security type as a whole, please refer to LPL's Understanding Funds of Hedge Funds article, located under the AI Education Center on the Alternative Investments portal under Research and Products/Alternative Investments on the Resource Center. You may also contact John Guthery at x4276. Source: Torrey Funds

Linsco/Private Ledger · Member NASD/SIPC For Broker/Dealer Use Only. Not For Client Distribution

LPL Research Alternative Investment Commentary

John A. Guthery, CFA Vice President, Research ­ Alternative Investment Strategist

2/8/2006

LPL does not offer hedge funds. Only funds of hedge funds strategies that have been approved by LPL may be used on a limited basis. NASD Notice to Members 03-07 requires that NASD member firms provide training to registered representatives before allowing them to recommend hedge funds or funds of hedge funds. To comply with this notice, LPL representatives are required to complete a special on-line training course regarding Hedge Funds prior to discussing or offering this product to customers. For more information concerning this training, please contact Registrations and request information concerning Red Ed training course "HEDGE FUNDS (60)". Representatives who have not completed this training will not be permitted to discuss or offer Hedge Fund products to customers. In addition to the training requirement, the NASD notice requires that when selling hedge funds and funds of hedge funds, members are required to: (1) provide balanced disclosure in promotional efforts; (2) perform a reasonable basis suitability determination; (3) perform a customer-specific suitability determination; and (4) supervise associated persons selling hedge funds and funds of hedge funds.

Linsco/Private Ledger · Member NASD/SIPC For Broker/Dealer Use Only. Not For Client Distribution

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