Winner: Best hedge fund group

When pushed to define CQS’s ethos, founder Michael Hintze has a short but sweet response: strive for excellence.

This ethos has served Hintze well since he founded the company in 1999. He has remained a central figure at CQS to this day, acting as portfolio manager of the CQS Directional Opportunities Fund and senior investment officer for the entire company.

CQS is a global multi-strategy asset management company with its investment processes based on fundamental bottom-up research.The company was established in 1999 by Hintze.

It offers a number of products including a range of hedge funds including ABS Fund (investing in asset-backed securities and related markets), Asia Fund (convertible bond and equity arbitrage), Convertible and Quantitative Strategies Fund (market neutral convertible bonds and equity arbitrage fund with a global mandate), Credit Long Short Fund (long/short in liquid credit default swaps (CDS) and bond strategies), Directional Opportunites Fund (multi-strategy directional with a global mandate) and Diversified Fund (a fund of CQS managed hedge funds).

In addition CQS offers the Grosvenor Place CLO loan product, a long-only fund investing in European collateralised loan obligations, primarily secured loans, mezzanine loans and second lien loans. The long-only Convertible Opportunities fund focuses on global convertible bonds.

The company also has three listed funds: CQS Diversified Fund (a closed-ended investment company incorporated in Guernsey and listed on the London Stock Exchange, investing in the segregated portfolio alpha of CQS Diversified Fund); CQS Rig Finance Fund which invests in debt instruments for the construction of rigs and other infrastructure for offshore oil and gas exploration and production and the New City Funds.

Qualities which Hintze believes make CQS one of the best hedge fund groups today include attention to detail, sharing information, teamwork and operational excellence in terms of settlement, liquidity provision and controlling operational risk.

“We work together as a team across the piste although we do have individual responsibilities and accountabilities,” he notes.

When asked how the company might cope without him, he is quick to state that he has no intention of leaving the company he has groomed to just over $11 billion of assets under management (AUM). He “still feels very energised by this whole thing” and hypothetically suggests it might fare less well without him.

However, he describes himself as “less key than I was” to CQS and acknowledges the increasing importance of finding new talent within the hedge fund industry. “As we are hiring people, we want them to be additive to our overall intellectual capital, to make us smarter,” Hintze explains.

He also lauds the “talented” fund managers already working at CQS who “would probably do fine on a standalone basis but probably do better within our context,” he notes.

The company is particularly proud of having produced consistent absolute returns without recourse to gates, suspensions and side pockets, particularly in the aftermath of the financial crisis in 2009.

In terms of the company’s strategy for the future, Hintze explains that “as an asset manager we do our very best to be alpha producers.” This involves simply improving efficiency in the strategies the company already runs such as asset-backed securities (ABS) and convertibles strategies. “There’s always something to learn and always something to strive to do better, so we would like to do more in the asset-backed securities and distressed areas,” he says. 

While CQS may be an old dog in the hedge fund world, it can definitely learn new tricks. In 2010 it started dabbling in the world of Ucits with the launch of the Ucits III-compliant convertible CQS Distressed Value Opportunities Fund and it successfully listed the CQS Diversified Fund on the London Stock Exchange last year.

As CQS continues to grow and refine its funds, Hintze continues to believe in the “healthy” and “logical” institutionalisation of the industry, jokingly commenting that hedge funds today are not “two men, a dog and a shop”. “To make money you have to have a process but the process needs to be transparent and properly documented with an operational platform.”

Operational errors have taken on increased importance due to the public nature of the money many investors such as sovereign wealth funds and endowments manage. “Their business risk for you having operational risk is much higher than otherwise,” Hintz explains.

Hintze’s understanding of institutional investors needs has clearly been successful: CQS’s AUM has grown from $6.7 billion to over $10 billion in 2010 alone.