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Whitney Hedge Fund Wins Backing From BlueCrest Principals

Meredith Whitney
Kenbelle Capital CIO Meredith Whitney. Photographer: Patrick T. Fallon/Bloomberg

Meredith Whitney, the Wall Street analyst who forecast a flood of U.S. municipal-bond defaults in 2010 that hasn’t materialized, won backing from billionaire Michael Platt and other partners at BlueCrest Capital Management LLP for her new hedge fund-firm, according to a fund presentation.

Whitney’s Kenbelle Capital LP started trading on Nov. 1 with about $50 million from Bluecrest partners and other investors, said the presentation, a copy of which was obtained by Bloomberg News. Kenbelle, which invests in U.S. equities, is aiming for returns of 12 percent to 17 percent annually.

Whitney, 43, gained renown after correctly predicting Citigroup Inc.’s 2008 dividend cut. She started her own advisory firm in 2009 and earlier this year closed the brokerage unit, Meredith Whitney Securities LLC, after three unprofitable years. Whitney’s fund, American Revival Fund LP, seeks to profit from what she predicts will be the next cycle of growth in “America’s Heartland,” according to the presentation, a thesis that was documented in her book published in June.

Whitney told potential investors at a conference in New York this week that she started her own investment firm in part because she was tired of other people profiting from her trade ideas, according to a person who attended the event and asked not to be identified because the meeting was private. She had told delegates that she has a unique way of gathering research data that gives her a competitive advantage over rivals, the person said.

Platt’s Bluecrest

Whitney and Kenbelle co-founder Stephen M. Schwartz didn’t return messages left with an assistant seeking comment. Ed Orlebar, a spokesman for London-based BlueCrest, declined to comment.

Platt, a former JPMorgan Chase & Co. trader, co-founded BlueCrest, which oversees about $35 billion, in 2000. Platt was worth 650 million pounds ($1 billion), according to an April 2012 survey published by London’s Sunday Times. BlueCrest’s partners are not using the firm’s investor capital to seed New York-based Kenbelle, a person with knowledge of the matter said.

Whitney predicts that growth in states such as Arkansas and South Dakota will be twice the national average, according to the presentation. Those states have one-third less consumer leverage, lower taxes, right-to-work laws and high commodity exposure, the presentation shows.

Whitney’s Book

In her book, “Fate of the States,’’ published by Penguin Group (260 pages, $27.95), Whitney publicized a vision for a “plodding” recovery in some coastal states and an attractive future for “the central corridor of the country.” Whitney’s marketing documents use her book’s maps of the U.S., with arrows and circles showing economic and industrial growth over time. The presentation doesn’t refer to the book.

Schwartz, who was most recently employed at Guggenheim Partners LLC, had also worked at SAC Capital Advisors LP and worked with Whitney in 2002, according to the presentation. Kenbelle hired Mark Innaimo as a senior trader, according to the documents. He previously worked at Bay Crest Partners LLC, according data compiled by Bloomberg.

“Meredith’s track record of early trend identification combined with Steve’s track record of superior risk adjusted returns will seek to create alpha,” the fund documents said.

Whitney started her advisory business amid media coverage including a Fortune cover story crowning her “the woman who called Wall Street’s meltdown.” She predicted municipal-bond defaults totaling hundreds of billions of dollars in a December 2010 segment of CBS Corp.’s “60 Minutes” program. She later told Bloomberg News it had been “a guesstimate” involving “fifth-derivative dimensions.” Instead of collapsing, municipal bonds became a star performer of 2011.

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