Ron Resnick '88 Interviewed about "The Brand of Hedge Funds"
Excerpted from AllAboutAlpha.com:
To learn more about the realities facing hedge fund brands, we spoke to Ron Resnick, Co-Founder and Partner of CounselWorks, a business strategy and regulatory consulting firm which provides project based consulting and manages compliance and regulatory programs for hedge funds, private equity firms, investment advisers and broker-dealers.
Prior to founding CounselWorks, he was a Managing Partner, the Chief Administrative Officer and the General Counsel of Highbridge Capital Management, one of the largest hedge funds in the world. Upon joining Highbridge in 1993, and throughout most of his tenure, Mr. Resnick was responsible for the oversight and day-to-day management of Highbridge and its administration, operations, human resources, media relations and legal and regulatory activities. As a key member of Highbridge’s management, Mr. Resnick, organized and launched more than 20 private funds, and played a key role in negotiating the $1.4 billion sale of Highbridge to JPMorgan Asset Management Holdings, Inc. in December 2004, without a loss of operating control by Highbridge’s principals.
Mr. Resnick also co-founded Harmonic Fund Services, a full-service, offshore hedge fund administration and consulting company with more than $25 billion in assets under administration, 30 employees and 60 clients. Mr. Resnick is also a passive partner of Corbin Capital, a $2+ billion fund-of-hedge funds management firm. Prior to joining Highbridge, Mr. Resnick was an Associate in the Commodities, Futures and Options Group at Skadden, Arps, Slate, Meagher & Flom. He received a B.A. in Political Science summa cum laude from the University of Rochester, and a law degree from The University of Chicago Law School.
Q: How has the hedge fund industry ‘brand’ suffered during the financial crisis?
[Ron Resnick] The hedge fund industry in general as a brand has suffered during the financial crisis because the poor performance of many funds, and the failure of many funds to function as a ‘hedge‘ and to preserve capital, has caused many people to question the non-beta value of hedge fund strategies and to question the hedge fund fee structure — which is lucrative for fund-owners and not obviously beneficial to investors when funds have poor performance.
I personally think that it’s only the ignorant and populism pandering politicians who treat the hedge fund industry as a scapegoat for the financial crisis. It was the extremely heavily regulated investment banks who, risking their shareholders’ money, levered their firms up to 40:1! Most hedge fund managers have a significant portion of their net worth in their own funds. The interests between hedge fund managers and their clients are largely aligned and, as a result, leverage in hedge funds was a fraction of what it was at the supposedly heavily regulated investment banks. The problem is that publicly traded companies have an asymmetric risk profile problem in that portfolio managers and executives at public companies are incentivized to take excessive trading risks because if they win big they make a fortune and if they lose big public shareholders and maybe taxpayers pay the price – and those executives then quit their public company jobs and happily get jobs at hedge funds! Hedge funds don’t have that asymmetric risk profile problem because, in general, the interests of the hedge fund managers are aligned with their investors. I think only people who are pandering to perceived public passions are blaming hedge funds for the financial crisis.
Read the rest of the interview here.