Like most sectors of the financial world, hedge funds have taken a beating in the past 18 months. Pangea Capital, the investment management company run by Nicholas Swan - son of Sir John and one of Hamilton's newest common councillors - and Attila Koperecz, structures and manages special purpose vehicles that include hedge fund, private equity and fund of funds elements. Like everyone in the industry, the firm has taken its bumps and bruises.

Pangea, based in the Swan Building on Victoria Street, was not shielded from market forces, but has emerged from the recession with a new strategy, new capital and a new approach.

"As everyone knows, the markets have had a tough time over the last 18 months," Mr. Swan said. "Some of our funds have done quite well, and one not so well. We did begin to unwind our investment positions prior to the dramatic sell-offs in September and October 2008, because we were not comfortable with the markets." But the bulk of the liquidation of investments in that fund came one quarter too late, Mr. Koperecz said, speaking by phone from Connecticut, where he was on a business trip. As a result of the timing, "we found ourselves in some illiquid residual positions that cost us money. It was our fund of fund investments, i.e. the underlying managers, that suffered from losses", he said.

Since then Pangea has developed other business lines. It currently manages two separate funds of $50 million in emerging markets and has commitments for a further $200 million over [JUMP]<*t(0,0," ")>the coming months.

Pangea Emerging Markets Fund is a fund of funds, which invests in a highly-diversified pool of underlying managers that focus primarily on individual countries in which they have expertise. Areas covered include Brazil, China, India, Israel, sub-Saharan and Saharan Africa, Russia and Eastern Europe, and the Middle East and North Africa (known in the financial world as the MENA countries).

"We're looking at expanding our investment horizon in the next five to 10 years into areas that we think will show the strongest growth," Mr. Swan said. "We will provide an opportunity for investors to migrate from G-15 countries to the wider markets."

Another new fund, launched mid-2008, is Pangea Emerging Infrastructure Fund. "In a number of emerging countries, growth is effectively capped by the existing infrastructure, so development in that area is fundamental to progress," Mr. Koperecz said. "We see long-term opportunities for our more sophisticated investors in that process."

Acknowledging that we have not seen the end of the volatility that has marked stock market and hedge fund performance in the past 18 months, "the recovery time for the emerging markets has been a lot quicker and a lot more dramatic", Mr. Swan said. "The volatility remains, as we've seen in May and June, but investors understand that."

In the wider market beyond Pangea, a view has taken shape, following market volatility in the past year and a half, that "down 30 percent is the new flat". The extent to which that may be true, or may mask greater problems, will depend "on how nimble and how flexible some of those portfolios will prove to be to take advantage of the new opportunities that are out there", Mr. Koperecz said.

In that wider market, Mr. Koperecz distinguished systemic impairment - a general sell-off - from structural impairment, which relates more closely to the way in which a fund is investing. Funds suffering from the latter will take "a very long time to unwind, and some of them will probably never come back", he said.

nvesting is a long-term business, and both Mr. Swan and Mr. Koperecz stress that they are managing for the long term. Infrastructure investments, for example, take time to mature and require a long-term view from those who invest in them. Pangea, having survived the worst economic downturn in 75 years, intends to stick around for a long time to come.