 Nassau Based Guru Not to mention the many high powered hedge fund managers that reside here as expats.
This week, we take you into the world of Bahamas-based Mark Holowesko. Featured Article 
Most professional money managers are happy to downplay their early career disappointments, but Nassau-based Mark Holowesko keeps a 22-year-old framed rejection letter on prominent display in his second-floor office at Templeton Capital Advisors Ltd.
“Thank you for your helpful letter,” begins the polite, typewritten dismissal, in response to an unsolicited job inquiry by Holowesko, then a freshly graduated MBA from Babson College in Massachusetts.
It’s signed by the hand of the legendary Sir John Templeton, who pioneered a new era of international investing from a small attic office in a retail strip down the road, just outside the gates of Lyford Cay. Essentially, the letter reads: Thanks, but no thanks.
Within a year, Holowesko successfully landed a job at the Nassau office of Templeton Global Advisors with the same Sir John by impressing him with his initiative to become a Certified Financial Analyst. Inadvertently, he had also won the confidence of Sir John, who groomed him to manage the prestigious mutual funds he had created: Templeton Growth Fund, Templeton World Fund and Templeton Foreign Fund. “I was probably too young to understand what was going on,” recalls Holowesko, who was in awe of the genius of his mentor, now 94 and still a resident of Lyford Cay in New Providence. Sir John, too, was a young man in his 20s when he opened his own money-management firm and became the pioneer of international investing.
“I joined Sir John when I was 25, and when I was 27 he gave me all the funds that he used to run and told me to manage them. In fact, in 1987, he came and put them all on my desk and said, ‘From now on I want you to run these funds.’ “And perhaps that was the best market timing move in his history because three months later, we had the great crash,” Holowesko says, of the global stock market meltdown that began Oct 19, 1987, when the Dow plunged more than 22 per cent. The events of that Black Monday had the world’s most famous contrarian, Sir John, smiling at the prospect of picking up undervalued stocks. “Or maybe that’s why he was smiling: because I was running the money and not him at that time,” laughs Holowesko, who ran the mutual funds for the Franklin Templeton Group until 2000, the year he left to set up a new subsidiary to serve institutional and high-net-worth investors.
Today, Holowesko applies his winning ways to the competitive world of hedge funds, working on behalf of a select group of about two dozen institutional and high-net-worth investors around the world. They have placed their money in his five-year-old hedge fund, a $1.6-billion fund that is now closed to new investors. Two other funds worth about a combined $200 million include a long-only fund, and a short fund, which was also recently closed to new investors, all under Holowesko’s direction as chief executive officer of Templeton Capital Advisors.
“I don’t know that I’ve met anybody more competitive than him,” says Myles Pritchard, a Los Angeles-based international advisor with Merrill Lynch, and a childhood friend who grew up alongside the Holowesko family in The Bahamas. “Even at the Monopoly board, he’s pretty competitive. But, at the same time, he’s extremely ethical. I do business with a lot of people and it’s amazing how he can break everything down to the basics – it’s either right or wrong, or it’s positive or negative. It’s street smarts and ethical. And it’s always that way.”
An avid cyclist, Holowesko is up most mornings before dawn to take a two-hour, 45-mile spin around the streets of New Providence as a warm-up to his workday. He usually rolls into the office by 7:30, making the short trip from his Lyford Cay home by car or on his white Vespa. An accomplished athlete, he’s been cited as one of the “World’s Fittest CEOs” by BusinessWeek for being a three-time participant in the CEO Ironman Challenge in Lake Placid, NY. He was a champion rower in college and represented The Bahamas in sailing at the 1996 Olympics.
At Templeton Capital Advisors, Holowesko runs a tightly knit, collegial ship, with just 13 hand-picked staff, nearly all of whom are Bahamian. The straight-talking Holowesko keeps clients in the loop of investment decisions and fund holdings at a time when the vast majority of hedge funds are notoriously sketchy on disclosing details.
“I think the hedge-fund business has come under a lot of stress,” Holowesko observes. “I think that there are too many people who’ve gotten into it that don’t really know what they’re doing. I think there are a lot of hedge-fund managers whose area of expertise has fallen out of favour, so they’ve gone off into other areas where they’re perhaps not quite as capable, to try to generate the returns.”
Demystifying hedge funds
Since the 1990s, the demand for hedge-fund investments has expanded from high-net-worth individuals to institutional clients such as pension funds and endowments. The churn rate is high: In 2005, a record number of hedge funds went out of business. Chicago-based Hedge Fund Research Inc (HFR) reported that 2,073 new funds were launched in 2005, but 848 funds liquidated their holdings, translating into an attrition rate of more than 11 per cent – triple the rate of 2004. “It is an unforgiving environment,” HFR president Joshua Rosenberg says.
Exempt from the rules and regulations that govern public mutual funds, hedge funds aren’t required to disclose their activities and are only permitted to privately solicit sophisticated investors. Because they have flexibility in investment options, they can use short-selling, leverage and derivatives to bring returns that aren’t correlated to the markets. Individ-ual hedge funds vary dramatically in the level of risk they are willing to undertake. In this often murky environment, Holowesko stands out as a straight-talker in an industry that tends to shun discussing details.
“With most hedge funds, there’s sort of a certain… mystery,” Holowesko explains. “A lot of hedge fund managers try to maintain this aura in terms of what they do. They feel that maybe they can charge a higher fee. I think the amount of disclosure hedge funds give you is important. The more disclosure, the better.
“[If] you go to a lot of hedge-fund managers and give them $10 million to invest and you say, ‘Can I see a copy of your portfolio?’ they will say, ‘No.’ You can see the performance, but if you want to know how the performance is generated, they’re just going to tell you ‘No’. ”
Conversely, Holowesko and his team keep their international clients thoroughly informed on fund activities and investment decisions. A comprehensive quarterly report outlines the performance of holdings. More importantly, the report also measures and indicates the volatility of returns and amount of leverage in the portfolio, which is the key to understanding a fund’s riskiness and ability to protect assets in a down market.
Bahamian team
There is no question that the Bahamian office of Templeton Capital Advisors competes with the best of them in New York, London and Paris. Holowesko has achieved this by retaining a wealth of home-grown talent.
“You can’t run global money without putting together a team to do it, no matter how much you travel,” Holowesko says. “You rely on people to produce ideas and research… I might be in charge, but I’m not the smartest guy. I try to hire people who are much smarter than me, and who also have different spheres of expertise or experience to help complement what I can do.”
Both in their mid-40s, the two principal founders of the operation are about a decade older than the rest. “Greg [Cleare] and I are the old guys,” Holowesko says laughing. “Most of these guys are much younger and all generalists. I owe these guys a huge amount, all of these guys who came with me from Templeton.”
Those “guys” include portfolio manager Sean Farrington, along with analysts John Crone, Christopher Maura and James Nottage. Heading the trading desk is younger brother Stephen Holowesko, who used to work with Goldman Sachs in London and New York, and colleague Lee Farmer. “They help organize a lot of the equity arbitrage work. Those guys not only help buy and sell stuff, but they also track and monitor everything,” Holowesko says. |
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