BlueMountain Distressed Debt Head Said to Exit Amid Losses

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Ethan Auerbach is leaving BlueMountain Capital Management after distressed-debt holdings he oversaw as partner posted losses this year amid a massive market rally, people with knowledge of the matter said.

Auerbach was the head of distressed-debt strategies at the hedge fund, which oversees $22 billion in assets, the people said, asking not to be identified as they aren’t authorized to speak publicly. The firm’s holdings of the weakest credits posted losses in 2015 as well, the people said.

BlueMountain’s inability to keep up with benchmark indexes mirrors the struggle of U.S. distressed-debt hedge funds. They returned 3.2 percent in the first six months of the year, compared with a 25 percent rally in the Bank of America Merrill Lynch U.S. Cash Pay Distressed High Yield Index. The recovery was fueled by energy bonds, which rose with the price of oil, after the index in 2015 posted its worst returns since the financial crisis.

The firm’s flagship $6.8 billion BlueMountain Credit Alternatives fund was down 2.25 percent this year as of July 8, according to an investor document. 

Auerbach had been with the hedge fund since 2008.