10/17/2012

Mitsubishi Scouts Structured-Product Traders

Look for Mitsubishi Corp.ís alternative-investment arm in the U.S. to sponsor one or two hedge fund teams in the next year or so.

MC Asset Management formed in late 2011 via a joint venture between the Japanese conglomerate and Aladdin Capital founder Aminkhan Aladin ó with the aim of establishing a U.S. outpost for Mitsubishiís global asset-finance business. The Stamford, Conn., operation is looking to back alternative-asset managers with expertise in commercial properties and other real assets. Its first and only deal so far: forming a joint venture with Stamford-based Five Mile Capital to underwrite commercial mortgages for securitization.

On the hedge fund side, MC is scouting for structured-product managers with strong track records. The firmís backing could take any number of forms, including hiring teams from banks or large hedge fund operations, seeding emerging managers, acquiring smaller shops and forming joint ventures such as the Five Mile deal. In any case, MC is looking to stake each team with $50 million to $100 million of balance-sheet capital, then take the lead in marketing the vehicles to institutional investors globally.

Chief executive Patrick Curran, who joined the firm last month from Raymond James & Associates, is chiefly interested in managers that invest in commercial-mortgage bonds and asset-backed securities tied to transportation assets and industrial equipment. He plans to avoid residential mortgage-backed securities, at least for now ó though he foresees broadening the operationís scope down the road. MC currently manages a couple of small hedge funds it took over from Aladdin that had a combined $168 million of gross assets as of May 1.

MC is among a growing number of asset managers and investors pouring money into structured-product vehicles. On Oct. 1, for example, a mortgage-bond team that formerly worked at Dalton Investment launched a hedge fund with $205 million under the banner Illumination Asset Management. Other structured-product fund operators, including Premium Point Investments and Seer Capital, have seen a flood of fresh capital (see article on Page 7).

Of the nearly 30 alternative-investment strategies tracked by Hedge Fund Research, structured products has been the most profitable so far this year, with the HFRI Fixed Income-Asset Backed Index up 13% through Sept. 30. By comparison, the broad-based HFRI Fund Weighted Composite Index had gained 4.7%.

Mitsubishi originally developed its alternative-investment business to fund its own operations around the world. Its businesses run the gamut from energy, metals and food to aerospace, life sciences and textiles.

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