A former managing partner of BlueMountain Capital Management is nearing the launch of a specialist credit hedge fund, in the latest sign that investors are eyeing opportunities betting on rising defaults in this ageing credit cycle.
Peter Greatrex, who left alternative investment specialist BlueMountain in 2017, last year set up Boundary Creek Advisors and has raised around US$150m-$200m ahead of a launch planned for early next month, according to company filings and people familiar with the matter. Boundary, which is incorporated in Delaware with offices in New York, has hired a number of staff and also opened a London office this year.
A single-page company website says that Boundary Creek Advisors will be dedicated to “uncovering long/short credit investments across North American and European debt markets”, suggesting the company will look to generate returns by betting on whether companies will default. Greatrex was head of private investments at BlueMountain and had also previously headed research globally at the credit specialist.
A number of European companies have struggled to repay their debts this year, prompting their bonds to plummet in value. Last week, a group of banks and investors decided that a bankruptcy credit event had occurred with relation to Rallye, triggering credit default swaps, after a French court placed the holding company of French retailer Casino under creditor protection. Last month, Thomas Cook’s bonds plummeted after the travel company issued its third profit warning in less than a year.
Boundary sent a letter to the International Swaps and Derivatives Association in April confirming it would adhere to a protocol relating to derivatives trades, suggesting that it plans to be active in those markets as well as buying and selling corporate bonds. Traders use derivatives such as CDS to bet on the likelihood of companies defaulting on their debt, sometimes using leverage to amplify the size of those positions.
LATEST LAUNCH
The interest in long/short credit funds represents something of a turning point following years of ultra-low default rates in Europe, with the European Central Bank’s trillions of euros in bond purchases lowering borrowing costs across the board. Boundary will be the latest credit specialist looking to take advantage of potential opportunities following signs that credit market volatility is picking up.
Tresidor Investment Management, founded by former BlackRock executive Michael Phelps, is set to launch next week, according to a person familiar with the matter. Tresidor will “invest into the full spectrum of tradeable European credit”, according to the company’s website. Phelps previously oversaw US$35bn of European credit investments at BlackRock, the asset management giant, the website said.
Diameter Capital Partners, a New York-based credit specialist that launched in 2017, has also been looking at opportunities in European credit, according to a person familiar with the matter.
GEARING UP
Boundary has been hiring as it gears up for its scheduled launch in early July. Ian Cohen joined as chief financial officer and chief operating officer in New York from Tricadia Capital Management in January, according to his profile page on LinkedIn.
That same month, Boundary registered as a limited liability partnership in the UK, according to filings at UK Companies House. It has been hiring staff to work in its offices just off Oxford Street in London.
The filings name two former BlueMountain employees, Areti Loizuo and Vincent Cooper, as designated members for Boundary Creek UK. Loizou joined Boundary Creek Advisors in November, according to her LinkedIn page, having previously worked as a research analyst at hedge fund BlueCrest Capital Management and as a partner at BlueMountain.
Cooper left BlueMountain last year after roughly 10 years at the firm, according to the Financial Conduct Authority’s register. Cohen, Cooper, Greatrex and Loizou are all partners in Boundary Creek Advisors, according to people familiar with the matter.
Charles Colbourne, a co-founder of capital financing specialist Channel Capital Advisors, is named as director of Boundary Creek UK Holdings, which in turn is listed as a non-designated member of Boundary Creek UK, according to filings at Companies House.
