"Lupoff, Ex-Millennium Manager, to Start Distressed Hedge Fund
By Tom Cahill
Lupoff, 49, will trade the debt of companies that are in or near default or are involved in legal disputes, spinoffs or exchange offers, he said in an interview today. He aims to initially raise about $100 million and operate out of San Francisco starting in August. He left New York-based Millennium this month.
About 28 percent of investors plan to commit capital to distressed-investing strategies in the next 12 to 18 months, the most of any strategy, according to a survey conducted this week at the GAIM International hedge-fund conference in Monaco. Lupoff said he doubts the Standard & Poor’s 500 Index’s 35 percent advance since March 7 signals an end for defaults.
Brokers are “dedicated to the idea that we’re seeing a turn in the market,” Lupoff said. “Those of us who are more agnostic see there’s nothing to suggest that’s justifiable.”
Before serving as a portfolio manager for Millennium, Lupoff ran a distressed-debt and special-situation fund for Robeco Investment Management Inc. in New York and worked with Martin Whitman, founder of Third Avenue Management, from 1990 to 1998.
Distressed debt is mostly loans and low-rated, high-yield bonds of companies that are having trouble meeting interest and principal payments. Investors can profit if prices rebound or the securities are swapped for equity in a restructuring.
Some investors are redeploying capital instead of pulling it away, said Jacob Schmidt, chief executive officer of Schmidt Research Partners Ltd., a London-based hedge-fund advisory firm.
“The cycle of redemptions is over, the long-term investors are still in here and they’re allocating again,” Schmidt said in a Bloomberg Television interview. “People are thinking about the next move.”