03/13/2013

Equity-Derivatives Pioneer Preps Debut Fund

A veteran equity-derivatives trader whose resume includes stints at Credit Suisse and Paloma Partners plans to launch a hedge fund on April 1.

Mike Belbeck has lined up about $10 million of firm commitments for his Holworthy Capital Fund, which will pursue a volatility-arbitrage trading strategy. His track record includes a 9.8% average annual return for the 2007-2011 period while managing a portfolio first at Vicis Capital and then at Paloma unit Sunrise Partners.

Belbeck left the Greenwich, Conn., operation at the end of 2011, then served a gardening leave before setting up shop in New York under the Holworthy Capital banner. The firm is named for a dormitory at Harvard University, where Belbeck went to school.

Although volatility is at its lowest ebb since the financial crisis, Belbeck has been telling investors his strategy is designed to profit in most market environments. That said, Holworthy is highlighting Belbeck’s performance during periods of financial turmoil — including monthly gains of 20% or better in September and October 2008, when markets were cratering.

Holworthy is offering limited partners two management-fee options. Those who agree to a one-year lockup followed by quarterly liquidity would pay just 1%, while those who opt for a six-month lockup followed by monthly liquidity would pay 1.5%. In both cases, investors would pay performance fees equal to 20% of gains.

Belbeck is assisted by two unidentified investment professionals, as well as an operations staff that includes a chief operating officer, chief technology officer and head of software development.

Belbeck has spent 20 years focusing on equity derivatives both on the buy side and sell side — experience that could give him an edge when negotiating swap contracts. After working as an intern at Citadel in the early 1990s, Belbeck joined Credit Suisse in 1997 to help build an equity-derivatives desk. He was trading volatility swaps and other instruments years before they became standard fare on the Chicago Board Options Exchange.

He later worked at Deutsche Bank and Vicis before joining the Paloma unit in 2010.

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