PlusFunds Group Inc.'s choice of Paul Aaronson to be its chief executive officer puts its further growth in the hands of an executive from a company, Standard & Poor's Corp., that has played an intimate role in the young hedge fund company's development.
Mr. Aaronson, 48, says he will approach expanding the hedge fund manager's $3 billion asset base - it has doubled in the past year - by broadening its product menu and distribution efforts. He succeeds Gabriel Bousbib who had been PlusFunds' president and chief executive officer since the company was founded in August 2002. Mr. Bousbib resigned in December to pursue other interests.
Mr. Aaronson was in charge of the portfolio services group as the executive managing director at Standard & Poor's; the group includes its index services and portfolio advisory businesses.
Standard & Poor's has been instrumental in PlusFunds' growth since the New York hedge fund company was started. Mr. Aaronson said the two companies worked closely as Standard & Poor's started its hedge fund index in October 2002.
The S&P Hedge Fund Index is designed to represent the hedge fund marketplace. It is made up of nine hedge fund investment strategies grouped in three categories - arbitrage, event-driven, and directional-tactical. In February 2004, PlusFunds introduced a hedge fund to track the index.
Investment vehicles tracking the S&P Hedge Fund Index are now available in Europe, the Middle East, North and South America, Japan, and Bermuda.
The relationship with Standard & Poor's helped PlusFunds increase assets under management from $1.5 billion in March 2004 to $3 billion at the end of March this year. Mr. Aaronson said his experience with PlusFunds while he worked at Standard & Poor's made the career change logical.
"I have been working with PlusFunds from S&P almost literally from the day I walked in the door at S&P in February 2001," Mr. Aaronson said. "We worked together to build the hedge fund indexes for S&P and related products for PlusFunds."
"We have a really positive outlook on the future of hedge fund investing," he said. "We have had tremendous growth, and most people in this business expect growth will continue. We think that we will be able to continue to attract share."
He said he would focus on developing the company's sales and marketing to help it build share. "The real driver is assets under management," he said.
Mr. Aaronson said PlusFunds had developed three portfolios with Standard & Poor's, based on the hedge fund index and two subindexes. PlusFunds would like to use the seven other subindexes as templates for new hedge funds in the next several years, he said.
"If the timing is right and the appetite is there, these subindexes are ripe for further development," he said.
Analysts said hedge funds remain enormously popular. Data released Wednesday by Hedge Fund Research Inc., a Chicago database group, show the hedge fund industry had $1 trillion of assets under management at March 31, up from $972.6 billion at Dec. 31.
In the first quarter investors added $27.35 billion to the products, a bit more than the $27 billion invested in them during the fourth quarter.
"Hedge funds continue to be a strong alternative investment even as equity markets continue to gain stability," said Burton Greenwald, a Philadelphia-based analyst at BJ Greenwald Associates. "Hedge funds add a great deal of value to a well-allocated portfolio."
Mr. Aaronson said PlusFunds is unique because it is the only company that offers a hedge fund index fund from Standard & Poor's. "There are four or five hedge fund index products on the market, but the S&P product was the first, and I believe it is the best," he said. "No one has anything comparable to what we have."
