Webb Strikes Out With New Hedge Fund

February 4, 2003 (PLANSPONSOR.com) - Hedge fund manager David Webb has set up a Cleveland-based hedge fund company that will specialize in buying and selling equities.

According to a Reuters report, Webb hopes to raise about $1 billion in assets for his Verus Investment Management, which also includes about two dozen of Webb’s former colleagues. Webb’s stock-picking prowess is credited with turning his Shaker Heights Investment Fund into one of the industry’s best performers.

Dan Flaningan, Shaker’s former head trader for hedge fund strategies, Brenton Luce and Bryan Moloney, both former research associates at Shaker, all joined Webb at Verus.

While Webb, 43, prefers to stay out of the limelight, investors know his reputation for delivering double-digit returns and are scrambling to put money with him, the Reuters report said, quoting an unnamed source. The new fund will follow Webb’s old strategy of picking stocks based on factors like corporate earnings, changes in the executive suite, and news of insiders selling stock.

Last year, Webb’s fund returned 12% net of fees and was ranked among the industry’s top performers, according to tracking group Hedgefund.net. In 2002, the fund outperformed the average long/short equity hedge fund, which lost 1.6%, according to the CSFB/Tremont Hedge Fund Index. The average US diversified stock mutual fund lost more than 20%, according to Lipper Inc.

Webb did even better in previous years. In 2000, the fund returned 56.89% and in 2001 it returned 32.36%, at a time when the average stock mutual fund suffered heavy losses.

Webb is the latest in a growing group of portfolio managers, analysts and traders to strike out on their own in a fast-growing industry that is expected to balloon from its current $600 billion in managed assets to roughly $2 trillion by 2010, the Reuters report stated.