Investcorp has backed former Goldman Sachs Group Inc. (GS) proprietary trader Reza Ali’s hedge fund with initial capital and will provide marketing support as the alternative investment firm expands in structured credit.
Prosiris Capital Management LLC, which plans to focus on securitized debt and corporate credit linked to the assets, received between $50 million to $100 million, a typical amount from the Bahrain-based firm, said Deepak Gurnani, Investcorp’s head of hedge funds and chief investment officer.
“We were looking to team up with a manager” with experience in the sector, Gurnani said. “Unfortunately, most of the portfolios got decimated during the credit crisis. What immediately struck us about this firm is that Reza, who managed significant amounts of money during the credit crisis, performed well during the period.”
Before starting New York-based Prosiris in 2009, Ali headed the Americas principal funding and investments group at New York-based Goldman Sachs, where he managed “a multi-billion dollar portfolio of credit and structured finance assets and credit derivatives” from 2006 to 2009, according to an e-mailed statement.
Ali, 41, said in a telephone interview that he couldn’t comment further on the details of his trading at Goldman Sachs.
While values of securitized debt have rallied by record amounts from the unprecedented lows reached during the credit crisis, the market is compelling for investors because so few fund managers understand the nuances of the assets, Ali said. Banks in both the U.S. and Europe are also off-loading their holdings at a faster pace after bolstering their balance sheets, he said.
“Most of the hedge funds did not play here. The more sophisticated players were on the sell side, prop desks or principal areas of the banks,” Ali said. Prosiris will use both “short” and “long” bets in its investing, he said, meaning it can profit from declines and gains in the market.
Before Goldman Sachs, Ali worked at Merrill Lynch & Co., where he created the firm’s structured-credit proprietary trading desk, and also headed structuring for credit derivatives in Europe, according to the statement.
Investcorp, which oversees $11.8 billion of assets, first invested in securitized-debt funds in 2006, when it began participating through a fund in bets against the U.S. subprime mortgage-bond market as “portfolio insurance,” Gurnani said.
Prosiris will become the seventh investment adviser on the firm’s so-called single manager platform, which has a total of $1.6 billion in money from Investcorp and its clients under management.
Seer Capital Management LP, the investment firm headed by Philip Weingord, Deutsche Bank AG’s former head of global markets in the Americas, has also said hedge funds focusing on securitized debt should be attractive to investors because fewer money managers have expertise in the sector.
The main hedge fund run by New York-based Seer, which oversees $400 million in assets, gained 9.2 percent in the first four months of this year, after a 24.9 percent return last year, according to a monthly letter to investors.
Seer’s best-performing investments in April were in unusual asset-backed securities and collateralized loan obligations, which pool leveraged loans and slice them into securities of varying risk, according to the letter. That reflects “our capability to identify opportunities across subsectors” of securitized debt beyond just residential- and commercial- mortgage securities, Seer said.
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