Global Partners Group (GPG), an investment management company based in Fort Lauderdale, Florida, is a rarity in the finance industry. GPG is a Hispanic-owned firm that seeks to develop hedge fund managers and connect them with institutions that provide seed capital to launch new funds.
"It's like a matchmaking service," says chairman and CEO Marcos Konig, a native of Venezuela. "We take people who have talent in trading, give them the tools and infrastructure they need to develop, and match them with the appropriate hedge fund capital providers."
GPG has offered a range of financial products and services to institutional and private investors since Mr. Konig founded the company as North American Institutional Brokers in 1987. He and his two brothers, senior advisor Salomon and senior vice-president Harry, together own 51 percent of GPG. The firm has 31 employees in the United States and 25 representatives in 14 countries, mostly in Latin America.
GPG posted revenue of $8.5 million in 2000, during the height of the bull stock market. That same year, the company acquired New Jersey–based Westfalia Investments in return for 49 percent of GPG. As the market fizzled, GPG's revenue dropped to $4.6 million in 2001 and $4.2 million in 2002.
Looking to profit from the growing popularity of hedge funds, last year GPG launched efforts to develop or train hedge fund managers. The company recruits individual traders who manage their own portfolios of at least $250,000. GPG provides research, administrative assistance, and technology to make trades. The firm tracks and evaluates portfolio returns and strategies. Top performers will get seed capital from GPG and its financial partners to create boutique hedge funds.
Hedge funds are controversial and high-risk investments. Like mutual funds, hedge funds consist of pools of money from investors. But hedge funds can make a much wider variety of moves. They can take long or short positions (betting values will rise or fall). They can trade stocks, options, bonds, derivatives, currencies, and commodities. And they can use arbitrage and buy and sell undervalued securities. Many funds hedge against downturns in the market, but there are dozens of investment strategies, and they can vary greatly.
Hedge funds are a mystery to most people, including most Hispanics, who tend to have fewer investments in stocks and mutual funds than the general population, according to polls and financial experts (see the Hispanic Asset Portfolio report on page 14 of this issue).
"Hispanics are 10 steps behind in understanding what investments are in general, so it will take a while for them to understand hedge funds and invest in them," Mr. Konig says.
For the most part, Hispanics have not been among the higher-income individuals who have traditionally invested in hedge funds. But that could change. Hedge funds have become more popular during the stock market downturn of the last few years. Institutions are starting to market hedge fund investments to small investors for as little as $500.
There are more than 6,000 hedge funds in the United States, and the assets they manage have doubled over the last five years to $665 billion, according to Chicago-based Hedge Fund Research. Analysts predict that figure could reach $2 trillion by 2010.
Because of that growth, the demand for fund managers threatens to exceed supply. More than $7.5 billion in hedge fund seed capital is in need of managers, according to InvestHedge, an industry publication. Analysts point to the need for hedge fund "intermediaries" like GPG because there are no industry standards for training and evaluating hedge fund managers, and poorly trained managers can threaten fund performance.
