Neal Berger has been working on Wall Street for more than two decades and has been in the hedge fund industry for 20 years. Prior to founding Eagle’s View, Neal was the Founder and Director of multi-strategy funds, Apogee Fund, Ltd. and New Edge Fund, Ltd. He had previously been employed as a Managing Director and Global Macro trader at New York-based Millennium Partners, a well known hedge fund in the industry. Neal has allocated capital to hedge funds for 18 years both personally and on behalf of wealthy families. He had previously been employed as a Vice President of Proprietary Trading with Chase Manhattan Bank and Fuji Bank in New York. Neal started his career as a Financial Analyst at Morgan Stanley.
We chat with Neal Berger to learn more about his hedge fund of fund, Eagle’s View.
DarcMatter: Please provide a high level overview of your investment process.
Neal: Eagle’s View seeks to invest with Managers and Strategies that have a positive expectancy and a very favorable risk/adjusted return profile throughout any type of market condition. We seek to invest in strategies that have no correlation to the direction of mainstream markets such as equities, fixed income or commodities. We are looking for strategies that capitalize upon structural inefficiencies and have a positive expectancy. Given the massive amounts of capital chasing opportunities, we have found greater opportunities in more “niche-oriented”, under the radar, capacity constrained strategies where the demand/supply equation for edge is more fertile. We invest in strategies such as Electricity Arbitrage, capitalizing upon inefficiencies in Shipping Derivatives, various forms of Statistical Arbitrage and Algorithmic Pattern Recognition, etc. We invest in strategies where the underlying instruments are liquid.
DarcMatter: What is your approach to managing risk?
Neal: We look at risk holistically. In other words, we are not only concerned with the investment risk of the strategy, rather, we are concerned with operational risk, fraud risk, key man risk, liquidity risk, etc. Taken together, on a qualitative basis, we put these risks into a “risk funnel” and make a determination as to the attractiveness of the risks versus the rewards of the opportunity. If the risk/reward is favorable, we size the position appropriately given the relative attractiveness of the risk/reward coupled with the expected volatility of the return stream such that we generally attempt to normalize our risk/reward opportunities through sizing across our portfolio. Obviously, there is much more to this, however, given the limited space, I think this is a decent overview of the process. We only invest in Funds that have a credible administrator and auditor. We examine operational risks such as the methodology of cash movements within the Firm, etc.
DarcMatter: What differentiates Eagle’s View from other firms in the sector?
Neal: As far as we understand, there is no other Firm in our sector like Eagle’s View. Eagle’s View has a focus on niche-oriented strategies that do not correlate to broader markets. We generally do not invest in mainstream strategies such as traditional long/short equity, event driven, distressed, credit, etc. We believe there are cheaper and easier ways to obtain ‘risk on’ exposures and we seek to provide a truly uncorrelated source of alpha for investors. We do not spend 10 minutes per year formulating macro opinions about the direction of markets as we are not in the prediction business. We do not believe that is a game that can be won in the long-term. Rather, we are in the observation business and we simply observe the markets and seek to invest in strategies where there is an edge and redeem from strategies where the inefficiencies have degraded.
DarcMatter: What’s going on in the hedge fund industry today? Is there too much capital out there?
Neal: Yes, there is too much capital chasing the mainstream strategies. There is over $3 Trillion+ of AUM in the industry, the bulk of which comes from the largest investors in the world. These investors have a big disadvantage in that they are relegated to writing 9-figure checks to move the needle on their overall pool of capital. Thus, they can only look at strategies that have the capacity to absorb this type of capital, and, they tend to invest in many of the same Managers because there is career safety in numbers. Overall, the demand/supply equation for finding the top talent is becoming increasingly unfavorable for the investor as money continues to flow into the industry en masse while the top talent is either closing to new capital, retiring, or otherwise has become asset gatherers. This is why Eagle’s View seeks to invest in non-mainstream and under-followed strategies that are generally un-investable by the larger allocators in the space.
DarcMatter: Finishing off on a fun note, tell us a little known fact about yourself.
Neal: I made a $100k weight loss bet with poker legend Phil Ivey and I won.