Aladdin Capital Holdings LLC, the investment firm that shut down its broker-dealer this year, is splitting off part of its asset management business into a new company majority owned by Japanese trading firm Mitsubishi Corp. (8058)
Less than four months after closing the brokerage it started in 2009 to take advantage of reduced competition following the failures of Bear Stearns Cos. and Lehman Brothers Holdings Inc., the company is scaling back again. As structured credit markets evaporated in the financial crisis, Aladdin, which in 2007 managed some $22 billion, has seen its assets under management contract by about half.
Aladdin plans to sell its corporate credit hedge fund and bankruptcy-loan funds to MC Asset Management Holdings LLC, which will be 80 percent owned by Mitsubishi and 20 percent controlled by Aladdin founder Aminkhan Aladin. Stamford, Connecticut-based Aladdin Capital will go on managing about $9.6 billion of structured debt pools backed by assets including bank loans and corporate credit-default swaps, it said in an e-mailed statement.
“Aladdin’s related portfolio management teams will remain intact and the transition is expected to be seamless to investors,” the company said in the statement.
Mitsubishi already had close ties to the asset manager, having bought a 19.5 percent stake in Aladdin for $40 million in 2008 and providing initial seed money for the so-called debtors- in-possession funds that were started in 2010 with $573 million.
Still Managing CLOs
Among the assets Aladdin will continue to manage are collateralized loan obligations and other structured products that are backed by investment-grade bonds and mortgages. CLOs are a type of collateralized debt obligation that pools high- yield, high-risk loans and slices them into securities of varying risk and return.
Neal Neilinger, Aladdin’s chief investment officer, will become chief executive officer. Aladdin had 67 employees as of Oct. 31, Mitsubishi said in a statement on its website. MC Asset Management will have 20 employees initially, according to the statement.
The firm said its anticipated sale of its sponsored corporate credit hedge fund and DIP private-equity funds are subject to closing conditions.
Aladdin, created in 1999, said the structured debt business will remain its main focus as it exits more recent ventures that were started in the aftermath of the 2008 credit seizure.
The company in July started shutting its brokerage unit as boutique firms that match debt securities trades were squeezed out of the market when Wall Street’s biggest banks returned to trading credit.
The bankruptcy loan funds, which invested in so-called debtors-in-possession loans, were created to take advantage of what the company at the time called a “massive dislocation” in the wake of Lehman’s failure.
Aladdin hired former Goldman Sachs Group Inc. banker Luke Gosselin and Victor Russo, previously president of CIT Group Inc.’s business-credit unit, to run the funds.