12/11/2013

HedgeMark Leader Seen Heading for Door

Rumors are swirling that founder Ken Phillips is leaving HedgeMark International, which funnels client capital into separate accounts run by outside managers.

The chatter is that Phillips will work his last day at HedgeMark at yearend, with part-owner BNY Mellon potentially buying his remaining stake in the operation. Indeed, BNY’s early-2011 purchase of a non-controlling interest in the New York business included an apparent option to complete the takeover after three years had passed.

But some sources deny Phillips is leaving. They insist he maintains a strong relationship with BNY, whose high-profile deal with HedgeMark came via the bank’s Pershing unit.

Whatever the case, sources suggest that any hints of management turmoil at HedgeMark could hinder the company’s ability to land a key assignment it is believed to be pursuing. That contract, with what is described as one of the 20 largest public pension systems in the U.S., would call for the winner to create and oversee a customized portfolio of separate accounts. Proposals are due Dec. 13.

That said, one fund-of-funds manager said president Andrew Lapkin plays a more prominent role in HedgeMark’s day-to-day operations than Phillips.

Phillips launched HedgeMark in 2009, with a focus on funneling client capital into separate accounts set up with outside alternative-investment managers. The idea was to capitalize on growing investor interest in individually run portfolios, given their greater transparency compared to commingled funds. Phillips then built on that business by adding assignments like the pension contract that now is up for grabs, including a mandate from UPS’ $27 billion retirement system in May 2013. One rival said UPS moved $1 billion into HedgeMark’s program.

HedgeMark also sells risk-analytics services to investors and fund managers.

Aside from Phillips, HedgeMark has experienced several staff departures. Most recently, research director Hiroshi Harada quit in June to join Lighthouse Partners. His exit more or less coincided with that of Steven Lonsdorf, who served as president of HedgeMark unit HM Securities.

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