Samuel Cole Leaves Hedge Fund BlueMountain Capital, Considering `Options'
Samuel Cole has left BlueMountain Capital Management LLC, where he served as chief operating officer and co-head of trading for the $4 billion fund whose founders helped create credit-default swaps.
“He’s considering a variety of other options,” said David Kaiyalethe, a company spokesman. Michael Liberman has been named new chief operating officer, Kaiyalethe said. Cole, 40, helped guide the hedge fund through the changing landscape of privately traded over-the-counter derivatives, which are being transformed into a regulated marketplace after the contracts complicated efforts to resolve the financial crisis.
Last year, Cole and BlueMountain developed a licensing plan to offer the fund’s technology for managing risk and capital and tracking profits and losses to other hedge funds, pensions and endowments, according to a person familiar with the initiative. After the venture failed to attract sufficient buyers, Cole decided to leave the fund rather than return to his former position, the person said.
Liberman built the derivatives risk-management platform at Goldman Sachs Group Inc. before joining BlueMountain, Kaiyalethe said. He’ll be responsible for risk management, operations and technology at BlueMountain, according to the fund’s website.
Cole stirred debate in the credit-default swap market in June 2009 when he accused banks of blocking development of clearinghouses for trading the contracts. “The dealer community may be filibustering to protect its oligopoly and not seriously engaged in working with the buy side to develop a clearing solution,” he wrote in a letter to banks and regulators.
Opposition to CME
The letter was spurred by opposition to CME Group Inc.’s plan to begin clearing credit-default swaps. Clearinghouses, which are capitalized by their members, increase stability in OTC derivatives markets by becoming the buyer to every seller and the seller to every buyer. They also lessen the effect of a default by sharing the risk among the membership.
CME Group’s competitor ICE Trust, owned by Intercontinental Exchange Inc., had struck a profit-sharing deal with banks including Morgan Stanley and Goldman Sachs. ICE Trust has since become the world’s largest credit-swap clearinghouse, with $6.7 trillion of the contracts cleared as of July 30, compared with $195 million for CME Group as of July 29.
Before joining BlueMountain, Cole was an associate principal at McKinsey & Co. where he dealt in strategic operations. He earned an M.B.A. from the MIT Sloan School of Management and a bachelor’s of arts from Harvard University, according to a biography posted on the website of the Managed Funds Association.
Credit-default swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. JPMorgan Chase & Co. bankers developed the products more than a decade ago to hedge against losses from bank loans. One of them, Andrew Feldstein, helped start BlueMountain in 2003.
To contact the reporter on this story: Matthew Leising in New York at mleising@bloomberg.net.
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