Ex-Camulos Crew Scouting Distressed Plays

A team of former Camulos Capital staffers is back in the business of buying distressed assets.

Value Recovery Capital has risen from the ashes of Camulos, a distressed-credit hedge fund firm that got crushed by the financial crisis. The new outfit, which is operating from Camulos’ former offices in Stamford, Conn., scouts for large portfolios of distressed bank or hedge fund assets, then buys and manages them on behalf of deep-pocketed investors. The firm just pulled off its first deal, taking down a $150 million portfolio for an institutional investor.

Value Recovery is led by Camulos co-founder Richard Brennan and three other ex-Camulos staffers. Brennan said he’s taking a go-slow approach at first, but is already thinking about a possible fund launch down the road. “There are four of us here with very deep relationships, and we’re kind of sitting back and saying, ‘It’s time to be patient,’” he said. “But we’ll be back.”

Brennan foresees numerous opportunities in the second half, as European banks move to clean up their balance sheets to comply with more stringent capital-reserve requirements under the Bank for International Settlements’ recently adopted “Basel 3” accords. In particular, Brennan expects to get a crack at large portfolios of real estate loans, as well as loans and securities tied to commercial aircraft and shipping.

Value Recovery’s strategy is to first identify attractive investment opportunities, then gauge the appetite of various investors with which it works. Once it finds a willing buyer, the firm will manage the portfolio for that investor, charging either a finder’s fee or, preferably, a performance fee.

Camulos, which managed $2.5 billion at its peak, suspended redemptions in October 2008 after its flagship fund had fallen by about 20%. The firm never recovered, and finished winding down in the first quarter of this year. In the end, Brennan said, Camulos investors got most of their money back.

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