The Fund of Funds 50

Determining Hedge Funds’ Top Wall Street Analysts To determine which Wall Street equity analysts are rated highest by hedge funds, Alpha ranked researchers according to the scores that analysts would have earned in the 2004 All-America Research Team if only hedge fund personnel voted. To select the members of the original All-America team, Alpha‘s sister publication, Institutional Investor, sent questionnaires covering 71 industry groups and investment specialties to the directors of research and chief investment officers of all types of institutional investors. The identities of the survey respondents and the institutions that employ them are kept confidential to ensure their continuing cooperation. Over 800 individuals at more than 200 hedge fund firms managing an estimated total of $430 billion in assets voted. Their views are reflected in the accompanying list of top analysts.

Rankings were determined by using the numerical score each analyst received. Scores were produced by taking the number of votes awarded to an individual analyst and weighting them based on the size of the voting institution and the place that the respondent awarded to the analyst (first, second, third, fourth). For Convertibles, Equity Derivatives, REITs and Washington Research, votes for all analysts covering those fields at each firm were combined; the head of each team is highlighted in the listing. Teams and individuals were designated runners-up when their scores fell within 35 percent of the third-teamer’s score. When only hedge fund votes were considered, four sectors did not generate sufficient voting to determine winners: REITs, Quantitative Research, Small Companies and Technical Analysis. Two categories, Imaging Technology and Portfolio Strategy, did not field complete teams.

Analysts who changed firms after August 6 are cited at their previous organizations. This year three analysts honored by hedge fund voters changed firms or job functions after the cutoff date: Scott Craig of Morgan Stanley, ranked second in Electronics Manufacturing Services, left the firm to cover the same industry for Banc of America Securities. In September, Goldman Sachs announced that Gary Lapidus, ranked second by hedge fund voters in Autos & Auto Parts, would be moving over to cover financial conglomerates and mortgage finance. Airlines first-teamer Samuel Buttrick of UBS became managing director of proprietary trading at the firm in October.

Sectors are organized within broad groups: Basic Materials, Capital Goods/Industrials, Consumer, Energy, Financial Institutions, Health Care, Media, Technology, Telecommunications and Macro. II determined the sectors in consultation with research directors from the buy side and the sell side.