Diameter Raises $1 Billion for New Credit Hedge FundBy
The firm set to be among largest new hedge funds this year
Diameter will invest across performing and distressed debt
Diameter Capital has raised about $1 billion to make wagers on company debt, making it one of the largest hedge-fund startups this year, according to people with knowledge of the matter.
The firm founded by Scott Goodwin and Jonathan Lewinsohn started investing this month, said the people, who asked not to be identified because the information isn’t public. They are investing in securities across the capital structure including in junk bonds, loans and credit-default swaps. A spokeswoman for Diameter Capital Partners declined to comment.
The firm’s money-raising is a departure from recent struggles in the industry as investors fled hedge funds, rattled by middling returns and high fees. More funds shut down in 2016 than in any other year since the financial crisis, according to Hedge Fund Research Inc.
Investors yanked about $110 billion from such firms last year, and investment managers aren’t too optimistic about what lies ahead, according to an August survey by research firm Preqin. More than two-thirds of hedge-fund managers predict that the asset flow could be flat or negative through the rest of the year.
The one area where money managers have been successful in raising credit funds is the private-equity space, where firms have expanded their offerings beyond buying and selling companies, and are able to readily tap their investor base to diversify into credit investments. Buyout firms like BC Partners, Advent International and Thoma Bravo are among those that have been raising debut credit funds this year.
Goodwin was a former portfolio manager and head of credit trading at Anchorage Capital. He also did a stint as head of high-yield bond and credit-derivatives trading at Citigroup Inc. Lewinsohn was a senior executive at Centerbridge Partners before leaving for the new fund. He had previously worked with Goodwin at Anchorage as head of research and a member of the firm’s investment committee.
— With assistance by Jodi Xu Klein, Sabrina Willmer, and Simone Foxman