The first issue of EuroHedge was printed in January 1999 and ran to eight pages in length. Its purpose? To shine a light on a quickly growing but little-understood area of asset management: European hedge funds.

“Promising new fund managers often ‘close’ within a few weeks of launch, which means that it is imperative to find them quickly,” stated an editorial in the first issue. “You have to find them. They won’t find you. And it is worth looking because, although there is little information available on European hedge funds, they are an expanding asset class and are performing well.”

The magazine was initially a cottage enterprise. Founder Iain Jenkins, a financial journalist, wrote the entire first issue in his spare room and his wife Suzie proof-read the articles. But interest in the magazine (initially titled EuroHedge Update, see cover below) quickly grew, both from investors keen to learn about a sparsely-covered sector in Europe and managers interested in how rivals were faring. -

Two decades on, it is uncanny how some articles in the first few issues strike parallels with today. “Investors forgive Odey with $75m boost” runs a headline in the January 1999 issue, which reveals how the fund manager had regained investor trust in the years following a record drawdown in 1994. The fortunes of Marshall Wace, Sloane Robinson and other still-familiar names are tracked in the early issues. But in many other ways it was an entirely different industry, not least size: the sector in Europe managed just $15bn at the start of 1999.

That year was a landmark one not only for EuroHedge but the industry in general. Many of Europe’s leading names, including Lansdowne Partners, Aspect Capital and CQS, were finding their feet, while the sector’s rapid growth defied the gloomy predictions sparked by the demise of Long-Term Capital Management a year earlier. As the magazine celebrates 20 years, we have delved into the archive to chronicle 1999 using EuroHedge headlines.

JANUARY

Sweden’s high-flying Zenit pushes
into the US

Stockholm giant Brummer & Partners had launched Zenit, the first Scandinavian hedge fund, in 1996. The $900m long/short equity fund was the top performer in Europe in 1998, gaining 90.8%. Performance was boosted by the fund’s decision in the summer to raise its coverage of US equities from zero to 36% of its portfolio. “It paid off,” reported EuroHedge in its first issue. “While many other European-based hedge funds missed the early part of the post-October rally, Zenit didn’t.”

February

Europe bucks the trend and wins
new money

The early issues have a clear message: Europe’s hedge funds are on the rise. A piece on the second front page cites research estimating the size of the European industry to be $15bn, up from $14bn a year earlier. “Europe is the hot place for hedge fund investment,” the magazine reported in February. “Despite heavy redemptions from US managers after the Long-Term Capital Management debacle, European-based managers, particularly those investing in European bond and equity markets continue to attract capital.”

Truth and lies in the closing game

“Working out which hedge funds are about to ‘close’ is the new game in Europe,” declared another February article. “Investors need to know the ‘closing’ rules, as some funds, it appears, are more ‘closed’ than others.” There follows a list of funds which were either closed or almost closed, with an explanation of their admission policy. For instance, John Armitage’s $1.5bn Egerton flagship was one of Europe’s biggest funds and closed to all investors, while Marshall Wace’s Eureka flagship, running $550m, was only accepting money from existing investors.

March

Vive la différence continentale

“It is easy to believe the European hedge fund industry is just a London phenomenon – but it isn’t,” EuroHedge asserted in issue three. “While most managers are indeed based in London, there is a growing band of promising managers on the continent.” The piece informs readers about hedge funds managed in Frankfurt, Paris and Lugano and says investors are keen for non-UK exposure to diversify their portfolios. “Rather alarmingly, many of the London managers were running the same ‘shorts’ (SAP, Nokia and M&S) at the start of the year.”

April

Uncle Sam struts into London

The fourth issue said growth in the London hedge fund industry was driven not only by domestic managers starting funds, but US firms such as Citadel starting UK offices. “Tempted by talk of huge opportunities and less competition than they face in their home market, US funds are crossing the Atlantic to set up research and trading operations.” Other US firms mentioned were Och-Ziff and Moore Capital, whose founder Louis Bacon “is now part of the social and shooting set in London and owns a house in The Boltons, near Chelsea.”

May

Eureka approaches $1bn as top funds ‘close’

Marshall Wace was growing quickly in the early days of EuroHedge and the magazine reported on its plan to cap its assets of Eureka, its flagship, at $1bn. The firm was not alone in running out of capacity. “Eureka’s growth has been the most spectacular as it is on the point of rocketing to Europe’s elite billion dollar club of Sloane Robinson, Egerton and Zenit in eighteen months.”

Hintze picks $200m arb fund team

Michael Hintze was putting the final touches to his new team after leaving Credit Suisse First Boston to start CQS. He was backed with $200m by his old employer. “CSFB’s decision to hive-off Hintze’s proprietary trading desk into a separate fund – owned by Hintze – is likely to persuade other banks to do similar deals with their prop desk stars,” wrote EuroHedge, a prediction which came true in the years which followed.

Lansdowne poised for lift-off

Lansdowne assets had hit $63m by May, but few had heard of Paul Ruddock and Steven Heinz’s long/short equity firm. “The fund is still one of the least known of the clutch of European long/short managers that launched last year, partly because it started trading in the eye of the third quarter storm,” reported EuroHedge in a profile, which tipped the firm to succeed following strong early performance. “With Long-Term Capital Management blowing up and the market seemingly in freefall, it is hardly surprising that Lansdowne scarcely made a ripple on the stormy waters.”

June

Ex-AHL team launch CTA and European equity quant funds

“A new range of quantitative products is being launched by Aspect Capital, a company which reunites six of the team from AHL, the successful quantitative investment company that was bought by ED&F Man in 1994,” reported the sixth issue. Swiss investor RMF was to be an early backer, showing the important of funds of hedge funds to many early startups. Aspect was one of several new launches attracting support, with EuroHedge data suggesting new hedge funds drew in $1.5bn in the first half of 1999.

July/August

Brokers square up for prime fight

The growth of European hedge funds affected many areas of the financial ecosystem. Prime brokers, in particular, were well-placed to benefit. “Extraordinary things are happening in the world of London prime broking which have profound implications for investment banks, hedge funds and investors,” EuroHedge reported in July. “The first is a dramatic explosion of broking salaries. The second is the move by investment banks towards ‘capital raising’ for hedge funds. Both are part of a looming ‘prize fight’ between investment banks eager to win a greater part of the booming European hedge fund market.”

Salomon team crosses Rubicon with macro fund

Paul Brewer’s launch of Rubicon, one of London’s longest-running global macro funds, was reported in the summer of 1999. He was previously the co-head of the Salomon Brothers global foreign exchange operation in London. “The fund will launch in the autumn and continues the pattern of high-profile defections from the proprietary trading desks of the leading London investment banks,” reported EuroHedge.

September

Risk arb funds race into Europe

Like global macro, risk arbitrage was another strategy starting to put down roots in the Europe industry, which had hitherto been dominated by long/short equity. “Europe is the hottest risk arbitrage market around,” claimed EuroHedge. “Europe, which was once a tiny merger market compared to the US, is starting to catch up.”

October

Trading secret of Gartmore’s Guy

Roger Guy, one of the most successful long-only traders of the nineties, had turned his hand to long/short equity in February 1999 and it had quickly proved successful. EuroHedge reported that Gartmore are hoping Guy “will successfully lead them into the brave new world of hedge funds with some style.” The firm went onto be one Europe’s main hedge fund players in the following decade.

November/December

US cavalry rides into Europe

“From family offices to the legendary ‘Dallas doctors’, endowment funds and the growing army of fund of funds, US investors are increasingly willing to invest in European hedge funds,” EuroHedge reported in the final issue of the year. “Many US investors say that they are now looking to invest slugs of $100m in the right European manager, and most say that their preferred strategies are convertible or merger arbitrage.” US money was not the only route to fresh investment mentioned in the issue. The move by Stamford Associates, a UK pension fund consultant, to start a hedge fund investment vehicle was labelled “the first indication that mainstream pension fund consultants are ready to embrace hedge funds.” Industry growth was accelerating: 70 hedge funds started in 1999, almost three times the 25 which started in 1998. They attracted a record $3.5bn compared to $1.5bn the year before.

1999: the first year of EuroHedge on EuroHedge.