Aliso Viejo-based Armored Wolf LLC, one of the county’s larger hedge fund managers, is getting a $40 million multiyear placement from a French investment company.
Armored Wolf, which opened in 2008 amid the worst of the financial crisis, is getting the cash from NewAlpha Asset Management, a unit of Paris-based OFI Asset Management , which man-ages about $30 billion in assets.
Cofounder John Bryn-jolfsson said he hopes the placement brings more attention to the young firm.
“When we talk to leading managers around the world, Orange County is seen as an attractive place to visit and invest,” he said. “We’re finding that this area has critical mass in terms of executives and leading money managers willing to make treks here to see us. That has been a definite plus in building a new hedge fund business.”
Brynjolfsson, a former longtime executive of Newport Beach-based Pacific Investments Management Co., said his hedge fund has now attracted about a dozen different institutional and wealthy investors.
It has more than $100 million in assets.
The fund’s strategy centers on tracking how inflationary or deflationary pressures impact world markets.
“We’re trying to adjust our portfolio on a monthly basis to take advantage of changes in markets,” Brynjolfsson said.
It invests primarily in commodities and inflation-linked bonds. Stocks and bonds from emerging markets are two other types of holdings in the fund.
“The emerging markets provide us with a lens on what is happening in the developed world in terms of inflation versus deflation,” Brynjolfsson said. “In particular, emerging markets are a gauge of raw material demand. The other half of the equation we look at is how policies by the Federal Reserve and central banks around the world are influencing markets.”
When the fund started in early 2008, it was mostly with money from family and friends.
Cofounder
It was cofounded by Ron Solberg, another former Pimco executive who at one time headed up emerging markets research at the unit of Germany’s Allianz SE.
“We launched at the worst time imaginable,” Brynjolfsson said in an earlier Business Journal interview.
Armored Wolf later opened itself up to outside investments and started fundraising.
“It took a while to get our systems up and running, but we’ve built our infrastructure and in May investment capital started to really pick up,” Brynjolfsson said. “We’ve been averaging around $5 million a month in new investment money coming in to the fund since then.”
Brynjolfsson worked at Pimco for 19 years. He ran some of the company’s largest funds, including the Pimco Real Return Bond Fund.
When the fund launched in 1997, it was the first mutual fund to specialize in Treasury Inflation-Protected Securities, or Tips, which include inflation protection for investors.
“By the time he left Pimco, he was a bona fide star manager,” said Eric Jacobson, a mutual fund analyst at Morningstar Inc. “He really was one of the pioneers in Tips funds.”
At the end of his Pimco tenure, Brynjolfsson was managing close to $80 billion through his monitoring of bonds, according to Jacobson.
“It’s somewhat natural for someone in his position to start a hedge fund,” Jacobson said. “If you’re a successful money manager, it’s going to be a lot easier to go off and run a hedge fund.”
Flexibility
Unlike with mutual funds targeted at everyday investors, managers at hedge funds don’t have to deal with reporting their moves to the government and dealing with mass marketing.
“By working in a hedge fund structure, (Brynjolfsson) can work with a much more focused audience,” Jacobson said. “A manager of a very large mutual fund has to deal with a lot of outside demands for their time and attention.”
Armored Wolf investor NewAlpha has funded 12 other early stage hedge funds around the world since its inception in 2003, according to a release. Its investments total $450 million, the release said.
NewAlpha is looking to raise about $290 million in the next five months or so. It wants to divide the money up into six deals in the next 18 months, the release said.
It’s unclear if Armored Wolf or any of NewAlpha’s existing clients will see any of that money.
