Brigade opens new distressed fund (Magazine Version)
01 May 2011 - Suzy Kenly Waite
Brigade Capital Management, which ran $4.51 billion in its flagship long/short credit strategy as of January 1, recently opened a new distressed strategy to investors. Co-founder Don Morgan and portfolio managers Ivan Krsticevic and Ben Renshaw have been overseeing the Brigade Distressed Value Fund with $30 million in partner capital since January 1, which generated a net return of 3% through March. The fund opened to external investors in April. Brigade estimates that the strategy has a capacity of $500 million, and it has already raised $125 million, according to investors who have been briefed on the fund.
Brigade is predicting numerous distressed opportunities. According to a fund presentation, nearly $1 trillion of debt will mature during the next five years across a variety of industries.
“A multitude of complicated capital structures presents opportunities for experienced teams to source and lead complex financial restructurings,” the presentation stated. The fund will invest in both secured and unsecured bank debt and bonds in companies across an assortment of industries, including financial, publishing and gaming. The fund will charge fees of 2% of assets and 20% of profits and require a $5 million minimum investment. It will implement a one-year hard lockup, with a second year soft lock and a 4% early redemption fee. The firm has yet to decide on prime brokers for the fund.
As of January 1, Brigade, which launched in 2007, managed $8.7 billion in hedge fund and long-only assets, including the $4.51 billion in its long/short credit strategy. Morgan was previously a senior managing director and co-head of fixed income at asset management firm MacKay Shields, overseeing the firm’s $18 billion high-yield group from 2000 until his departure in 2006. When he left, the firm closed its $1 billion MacKay Shields long/short strategy. The fund, which launched in October 2001, had produced a net annualized return of approximately 12%.
Krsticevic has been with Brigade since 2009. Previously, he spent 10 years at Elliott Management, where he was a senior portfolio manager focused on event-driven investments in North America and Europe. Before that, he was a financial analyst at Bear Stearns from 1997 through 1999. Renshaw previously worked at MacKay Shields from 1999 through March 2006 as a portfolio manager within the high-yield division, where he covered the cable, health care and paper sectors.