First New York Building Hedge Fund Business(HFAlert)

[dealmaker]

First New York Building Hedge Fund Business(HFAlert)
Proprietary-trading shop First New York is taking another stab at launching a hedge fund. The firm, whose 125 internal and external portfolio managers run a little more than $3 billion of gross assets, envisions a multi-strategy vehicle that largely would mirror its prop-trading portfolio. Since the 1980s, First New York has earned mostly double-digit returns, with low net exposure and little volatility. The New York firm plans to begin trading the FNY Total Return Fund in the second half, seeding it with $200 million of gross assets. It then would spend some time developing a track record while marketing the vehicle to outside investors.

 

[gaussian]

Concurrently, First New York is working on an unusual plan to raise fresh investment capital by issuing about $50 million of corporate bonds. It obtained a “BBB-” corporate rating from Kroll last year, and recently discussed the deal with prospective underwriters. The proceeds, with leverage, would be used in part to stake additional portfolio managers.

I wouldn't invest my worst enemy's money in BBB-. How does a hedge fund, a place that is supposed to have great risk control, be so risky they can't even get proper corporate debt? LOL.

 

[newwurldmn]

I wouldn't invest my worst enemy's money in BBB-. How does a hedge fund, a place that is supposed to have great risk control, be so risky they can't even get proper corporate debt? LOL.

Because they are using the money to lever it at a brokerage account and then trade it.

Of course debt like that would be very low quality paper.