The mystery of Tony Blair's finances

[Magda Hassan]

Who more appropriate than Blair to go to Sin City?

Hedge fund faithful and Tony Blair head to Vegas

Conference participants reportedly clamour for passes to the VIP areas backstage
Financial Times
May 11, 2014
London: Tony Blair, Francis Ford Coppola and Mary Schapiro are just a few of the many high-profile names descending on Salt this week, the Las Vegas conference billed as the must-attend hedge fund event of the year.
The gathering, which has been described as "Fund Forum on crack" in reference to the glitzy asset management summit held in Monaco every year, is the brainchild of SkyBridge Capital, a New York-based fund of hedge funds company.
The US boutique has been pulling together elite figures from political, hedge fund and Hollywood circles since 2009 and Troy Gayeski, the company's fresh-faced partner and senior portfolio manager, is quick to put SkyBridge's own rise in assets down to the success of Salt.
But the 40-year-old is tight-lipped about revealing what goes on after hours at the conference, which is expected to draw roughly 1,800 participants from the hedge fund industry.
"There is a really funny [anecdote] about the former premier of a European country, but it might be taken out of context," he says.
Wild nights appear mandatory unsurprising given Salt is held at the Bellagio, the showy hotel and casino on the Vegas strip famed for its dancing fountains. In an age of austerity, however, criticism has been levied at the organisers as a result.
"There is always the potential for someone to look at any gathering and spin it in a negative light, but anyone who takes five minutes to look at the content realises that it spans the gamut from charity activities to very balanced political dialogues," Gayeski says.
Surreal combination
Conference participants reportedly clamour for passes to the VIP areas backstage, which will this year give them the chance to rub shoulders with speakers including Valerie Jarrett, senior adviser to Barack Obama, former NBA basketball star Earvin "Magic" Johnson and Hollywood veteran Kevin Spacey.
Last year the conference brought together another surreal combination of speakers when hedge fund mogul John Paulson spoke alongside former French president Nicholas Sarkozy and The Godfather star Al Pacino.
Gayeski casually describes sitting down to dinner with such an eclectic mix of personalities as an "interesting" experience, although he admits Pacino and his "very well-tanned, very attractive girlfriend" might have felt out of place.
"[Pacino] showed up late and he probably does not surround himself with 30 guys in suits too often, so you could tell he was partially uncomfortable," he says.
Gayeski, who joined SkyBridge when it acquired Citigroup's fund of hedge funds business in 2010, believes the event has helped improve the company's brand recognition among investors.
SkyBridge was previously "relatively unknown", he says, but the company's asset base has nearly doubled to $10.4 billion (Dh38.2 billion) over the past four years.
Salt's Las Vegas location is testimony to the fact that Anthony Scaramucci, the founder of SkyBridge, is unafraid to fly in the face of convention.
Government bailouts
Gayeski points out that Salt was set up at the same time President Obama was publicly condemning companies that had received government bailouts but continued to send employees to lavish events in Vegas, causing the number of corporate events in America's Sin City to drop.
He believes choosing to set up in Las Vegas at such a moment has paid dividends. "We recognise that there is a downside risk to being in the public eye but, ultimately, we think the conference is a strong benefit to our business."
It is perhaps unsurprising that Gayeski has ended up at a relatively contrarian shop, given his unconventional route into asset management.
The portfolio manager was raised in what he describes as a "blue collar" community in Scranton, the former coal-mining heartland of Pennsylvania. "Where I grew up, I had no idea what asset management or finance was. People had cheque books that was kind of it," he says.
After gaining a degree in chemical engineering from the Massachusetts Institute of Technology, he spent three years working in engineering before deciding that the hedge fund industry had more appeal.
He says: "In a lot of engineering disciplines, you are very cloistered and you spend eight hours a day by yourself in a lab or on a computer. That can get frustrating over time. What attracted me to asset management is that it is an industry where, if you are very analytical but also like to deal with people, you can do well."
Despite his humble origins, Gayeski is at ease with the colossal earnings of many of the hedge fund chief executives his company invests in.
Challenging market
Two of the biggest contributors to SkyBridge's performance last year, for example, were John Paulson and Third Point's Dan Loeb, who earned $2.3 billion and $700 million respectively in 2013.
"At this stage of many of these managers' careers, they have been blessed with high IQs, a hard-work ethic, and they have been able to navigate very challenging market and business environments," Gayeski says.
"That does not make [these pay levels] right. That does not make it good. But in a capitalist economy, markets set prices, so there is no political axe to grind there for us. It is what it is, we try to get the best fees we can, and we don't begrudge other people's success."
SkyBridge is known among its competitors for taking punchier bets than most in terms of its strategy, having shifted 40 per cent of its investments towards event-driven hedge fund managers over the past 18 months.
This followed a concentrated bet on hedge fund managers with mortgage-backed securities expertise in 2012.
Gayeski believes his company's willingness to make bold investment choices is what sets it apart from other funds of hedge funds, many of which have suffered large outflows since the financial crisis amid lacklustre performance.
He says: "One of our biggest criticisms of the fund of funds industry is that if you take such a low level of risk, even if you get everything right, you are only going to make several per cent return.
"We are far more dynamic, in that we [change] 40 per cent of our portfolio per year. We don't always add value with those changes, but typically we get more right than wrong."

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