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Digital Subscriptions > The Hedge Fund Journal > Issue 110 - December 2015 | January 2016 > Palisade Capital US Equity UCITS

Palisade Capital US Equity UCITS

Veteran stock picker returns

The meeting of minds between Palisade Capital Management LLC CIO, Dennison ‘Dan’ T. Veru, and its US equity long/short portfolio manager, Paul K. Flather, was “akin to the ‘blink’ moment described in Malcolm Gladwell’s science of first impressions,” recalls Flather. The affinity was instant, as Veru, who knew Flather by reputation, saw how Flather “has a unique ability to spot value and to see trouble before others," says Veru. "I couldn’t wait to have him join Palisade because I’ve never met anyone who can consistently generate returns from his shorts in all markets.” Though Palisade was no stranger to hedged strategies (having run a convertible arbitrage portfolio since 2004), stock picking is Palisade’s DNA, so Veru “wanted a strategy that leveraged the firm’s intellectual capital from 21 portfolio managers and analysts.” Palisade acquired Flather’s firm, Hermes Advisors, LLC, in 2013 and got the hedge fund – renamed – up and running within the firm.

Flather’s early years

After a successful career in institutional sales, Flather set out to capitalise on differences between market perception and reality, which he found were greatest for the smaller and mid-size companies that tend to have less sell-side research coverage. Having started with just $700,000 Hermes’ assets grew to a peak of $414 million between 2000 and 2004 and produced solid positive returns despite the turmoil of the post-internet boom and the 9-11 attacks. In 2005, however, a personal family health issue came up requiring an increasing amount of Flather’s time that diverted his attention from his work. Though Flather continued to manage money for family and friends, he told his clients that he would not be doing company visits as before and clients naturally redeemed their investments. After family issues normalised, Flather resumed his total focus on the strategy in 2009, but realised that he was going to have to prove himself to the hedge fund community all over again. Flather recognised that Hermes did not offer the institutional-quality infrastructure, processes and compliance needed to be a success.

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