Pacific Asset Management Hires Former GLG Partners Manager

London—Pacific Asset Management has hired a former GLG Partners manager with a reputation for punchy bets as the London-based business plans to replicate the success of investment firms such as Liontrust Asset Management and River & Mercantile Asset Management.

The fund firm, which was set up last year with the backing of City veteran John Beckwith's firm Pacific Investments, hired James Berger to launch an equity hedge fund that will assess the macroeconomic factors that drive share prices.

Mr. Berger co-managed the $1.1 billion European Opportunity fund at GLG, now part of fund giant Man Group, before leaving to set up his own hedge fund firm B1 Capital in Switzerland in 2012.

There he took a huge bet early last year that stock prices would fall—a rare position among his peers. The move lost money in the first quarter as markets rose but then made money in the second quarter during a selloff.

However, B1 shut down last year, despite making money for investors every year, after failing to attract enough clients.

The move illustrates how tough it has become for startup hedge funds to succeed on their own, even those making positive returns. The $2.9 trillion industry has increasingly been dominated by big institutional investors who are often wary of small, unproven firms.

This has pushed many managers who had dreamed of building their own firms to instead join larger investment firms that let them run their own portfolio, while helping with costly functions such as sales and administration.

Mr. Beckwith, the uncle of British celebrity socialite Tamara Beckwith, is chairman of Pacific Investments. It has founded fund management firms including Liontrust, which manages £ 4.8 billion in assets ($6.34 billion), River & Mercantile, which ran more than £ 2 billion before being merged into a larger group in 2014, and Thames River Capital, which was sold to fund group F&C Asset Management.

The launch will be the third fund for Pacific Asset Management, which is based close to London's upmarket Sloane Square and already runs a global stocks fund and a U.S. smaller companies fund.

Mr. Berger said he aims to profit from turning points in the stock market. He also spends time looking at the liquidity of stocks—for instance by studying the actions of huge exchange-traded funds or computer-driven hedge funds—to try to predict price moves.

The proliferation of such funds "makes it much harder to know what's driving prices. A traditional sales trader [at a bank] in the '90s would know 75% of flows, now it's 15% of flows," Mr. Berger said.

Morgan Stanley's chief U.S. equity strategist Adam Parker wrote in a note to clients this month, reviewed by The Wall Street Journal, that macroeconomic factors account for more than half of a stock's performance, whereas most hedge funds are set up to try to assess stocks' intrinsic worth.

Mr. Berger also said that the price of bonds and bond-like stocks had become "extreme to an extent not seen in history" after the U.K.'s vote last month to exit the European Union.

"Why would you buy into overvalued, inflation-sensitive staples like Unilever or Scottish & Southern Energy?" he said.

Write to Laurence Fletcher at [e-mail]

(END) Dow Jones Newswires

July 22, 2016 10:35 ET (14:35 GMT)

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