Hedge Fund Seeing College Bubble Bets Against CompaniesSabrina Willmer
FlowPoint Capital Partners, the $15 million hedge fund co-founded by Charles Trafton, is betting against companies such as student-loan servicer Navient Corp. to profit from what it calls a college bubble bursting in slow motion.
The Boston-based firm is building positions against stocks of textbook publishers, student lenders and real estate companies that focus on college housing, Trafton said in an interview. Changes in the more than $1 trillion student loan market could hurt companies such as Navient, Sallie Mae and Nelnet Inc., according to a July investor letter from the firm.
Businesses “levered to runaway inflation in post-secondary education are susceptible to growth and margin shocks,” the firm wrote in the letter.
Students who got loans for college before the financial crisis are taking longer than expected to pay off their debts, thanks in part to U.S. relief programs. Moody’s Investors Service and Fitch Ratings have been considering downgrading almost $40 billion of federally insured student-loan bonds. Bill Ackman, who runs Pershing Square Capital Management, in April called student loans the biggest risk in the credit market.
Officials at Navient, Sallie Mae and Nelnet didn’t immediately return calls for comment.
FlowPoint was founded last year by Trafton, Ken Goodreau and Nick Trotman, according to an investor presentation. Trafton previously worked at The Boston Company Asset Management, while Goodreau was chief investment officer of multistrategy firm TIG Advisors and CIO for the Employees’ Retirement System of Rhode Island.
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