LIPPER HEDGEWORLD

Funds of Funds and PPNs
By Christopher Faille, Financial Correspondent
Friday, January 13, 2006

Principal-protected notes (PPNs) written on fund of fund underlyings have become a key source of assets for funds of funds in recent years. According to a UBS estimate in 2004, roughly 2% of the assets under the management of funds of funds got there through such structures. This is between US$15 and US$20 billion.

Asked about such products, consultant Janet Tavakoli, president, Tavakoli Structured Finance, Chicago, said that she isn't a "fan of fund of funds in the first place" and that the general idea of "investing in zeros to protect principal defeats the purpose of buying into a hedge fund." It offers the investor a bicycle on training wheels, at Ferrari prices, she said, "but you don't get to drive the Ferrari, the fund manager does."

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Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago-based firm that provides consulting to financial institutions and institutional investors. Ms. Tavakoli has more than 20 years of experience in senior investment banking positions, trading, structuring and marketing structured financial products. She is a former adjunct professor of derivatives at the University of Chicago's Graduate School of Business. She is the author of: Credit Derivatives & Synthetic Structures (John Wiley & Sons, 1998, 2001), Structured Finance & Collateralized Debt Obligations (John Wiley & Sons, 2008).

Janet Tavakoli's book on the global financial meltdown is Dear Mr. Buffett: What An Investor Learns 1,269 Miles From Wall Street (Wiley 2009).

Clients of Tavakoli Structured Finance have the benefit of proprietary consultation, which is not available in any other paid or public forum. Clients also commission proprietary research and analysis.

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