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Silicon Valley Vets Raise $500 Million Hedge Fund

1Sharpe Capital’s inaugural institutional fund will target income-generating investments in real estate loans.

A hedge fund firm started by a Cerberus Capital Management alum and a startup founder has raised half a billion dollars for its first fund.

1Sharpe Capital has closed a $500 million initial capital raise for the firm’s first fund, an income-generating strategy focusing on investments in private and public real estate loans. The California-based firm was founded last year by Rob Bloemker, most recently a portfolio manager at Cerberus, and Gregor Watson, co-founder of Roofstock, an online marketplace for single-family rental homes. The fund’s investments will be short duration and asset-backed.

The inaugural fund comes amid record fundraising by private equity firms, as big investors are stretching for yield. 1Sharpe’s founders said the current environment means that there will be plenty of opportunities for smaller funds like theirs that remain focused on certain securities.

“It’s not the time to raise billions of dollars and take risks,” Watson said. “Equities, bonds, commercial real estate. It’s all elevated. We’re very cautious.”

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1Sharpe’s partners bring a unique perspective to the income-generating strategy. In addition to Watson’s startup Roofstock, where he still serves as chairman, Watson and Bloemker had together co-founded Dwell Finance, one of the first lenders for the single-family rental home market. They sold Dwell, which originated $500 million in loans, to Blackstone in 2015.

Bloemker had spent 12 years at Putnam Investments as head of fixed income before becoming an enterepreneur. After leaving Putnam, he started Five Ten Capital, an asset manager that focused on single-family homes. He sold the firm to Cerberus in 2015, and joined Cerberus after the deal closed.

“Part of our strength is that we’re entrepreneurial and we have institutional capital experience,” Watson said. For example, he said their fund may invest in the credit of startup financial technology companies. 1Sharpe could provide funding as well as strategic advice to entrepreneurs. “We’re not just competing on rates,” he said.

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