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Altum Picks Off Anomalies

Inefficiencies persist in structured credit

Credit hedge fund strategies have garnered inflows at both extremes of the liquidity spectrum: liquid alternatives offering daily, weekly or bi-monthly dealing, and private lending strategies with multi-year, private equity style, lock ups are all sought after. Neither of these buckets fit Altum Capital Management LLC (Altum)’s strategy, which has generated a Sharpe ratio above two with low correlation to equities and credit. Altum finds its sweet spot in the middle ground of liquidity, trading instruments that generally have counterparty quotes but also expected holding periods consistent with at least a one year lock up. Altum’s fundamental, value-driven, multi-strategy credit approach seeks out value in areas including smaller parcels of asset backed securities (ABS) that might not be on the radar screen of some larger asset managers.

ABS Pioneer and Trader

Altum’s distinctive approach synthesises its founder’s more than 30 years’ of diverse and innovative experience in structured and credit markets. Altum Managing Member, and CIO, Marjorie Hogan, who was selected for EY and THFJ’s 50 Leading Women In Hedge Funds 2015 survey, has been a proactive pioneer in the asset backed securities markets since their beginnings in the 1980s. While working in Bear Stearns’ research department she founded its mortgage derivatives business in 1991. Hogan’s mentor, Warren Spector, who later became President and co-CEO of Bear Stearns “was very supportive and it was not tough to persuade him to approve the move into mortgage derivatives,” she recalls. Spector sat in the trading department to where Hogan later migrated.

Around the turn of the millennium, Hogan was also at the leading edge of new developments: as one of the first market-makers in structured credit instruments, such as CDOs (Collateralised Debt Obligations). The secondary market in CDOs had been slow to get off the ground because “it took a while for firms to feel they had confidence to trade the product, and documentation previously just warned that there might not be any secondary trading markets develop,” she recalls. Bear Stearns blazed a trail because “we were more disciplined, and wanted to make markets in the assets we were underwriting.” Hogan was an ideal candidate to spearhead this drive, because “by then I had profitably traded through many cycles so people were confident in my abilities,” she explains.

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