TT International looks to double hedge flagship assets

TT International is planning to grow its flagship $540m Permal Europe Limited and rebrand it TT International Ltd, after the hedge fund manager agreed with Permal and the fund’s directors to assume full responsibility for it.

It has run since 1989, making it one of the oldest European hedge funds on databases.

It began after Permal, over 95% of whose assets are in funds of hedge funds, asked TT’s founding partner Tim Tacchi to replicate for Permal’s clients the strategy he was already running for a well-known US hedge fund.

For this reason, it previously carried Permal’s name.

However, one investor said TT International would find it more difficult to market the product to prospective investors with another firm’s name on it.
TT has agreed with Permal and the fund’s directors to take on full responsibility for the fund, including its marketing.

The investment strategy on which the fund, and related managed accounts, are based has about $1.4bn assets.

TT plans to grow this to $3bn, but then pause for at least a year to gauge whether returns are being diluted by size. One well-placed source said it could accommodate $5bn in current conditions, but its manager wants to remain “very nimble, so TT is being quite conservative”.

Among other changes, the legacy arrangement of crystallizing incentive fees quarterly, will change to realizing them on a more investor-friendly, annual basis. An incentive fee equalisation policy will also be installed.

Putting $100m into Permal Europe at inception would have turned into $781m today – average annualized returns exceeding 10%.

Its 10-year volatility is around 9.6%, about half the 17% of MSCI World index of global shares.

Apart from 2008, when the fund edged 0.45% lower, its last down year was 1994, according to investors.

One investor said its focus on capital preservation was what set it apart from peers.

Last year, the investor added, it made money with a long gold position, short euro versus the dollar, and shorting Spanish banks among various equity positions. This year it benefited from positions in the yen and Australian dollar. Being long oil also helped.

TT International has $2.7bn in hedge fund strategies including five other pooled funds, and $19.1bn in total.

It is believed Permal will continue to have exposure to the strategy run by TT International, but via a separately managed account, forming part of its drive to invest via such vehicles.

The $23bn manager has 70 segregated accounts with about $6bn assets, and is actively encouraging managers to run money for it in this way, and a source with knowledge of the situation said clients in the fund would be able to switch to the account vehicle if they so wished.

Permal declined to comment.

David Walker

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