Leucadia Launches Global-Macro Operation

Leucadia National’s asset-management business, formed last year via the purchase of Topwater Capital, is starting a global-macro division.

Leucadia, whose other holdings include Jefferies, has tapped an executive at the investment bank, David Zervos, to lead the effort. Zervos is chief investment officer of the new Leucadia division, even as he continues to serve as chief market strategist and global head of fixed-income strategies at Jefferies.

The global-macro operation is still taking shape, but it appears Zervos’ team initially will manage institutional assets in separate accounts, then launch commingled funds at some point in the future. What’s clear is that the investment strategy will be driven by Zervos’ views of the global economy — suggesting more of a discretionary style than a systematic approach.

Investors who want in will have to clear a high minimum-investment threshold of $25 million and pay fees equal to 2% of assets and 20% of investment gains.

Zervos joined Jefferies in 2010 after a stint the year before as a “visiting advisor” at the Federal Reserve Board, where he had earlier worked as a staff economist. He also has managed global-macro portfolios at Brevan Howard Asset Management and UBS O’Connor.

In market commentary published by Jefferies last week, Zervos weighed in on the question of how quickly the Fed will wind down its bond-buying program. “While we look ahead to a diminished use of quantitative easing in 2014 and beyond, we should always keep in mind that low short-term rates are still going to be with us for quite a long time,” he wrote. “Thus far in this cycle we have seen the good and the bad from QE — and now we are approaching the unknown. But as we enter this more complicated phase of the recovery, rest assured that the Fed remains as committed to a reflationary recovery as ever.”

Leucadia is betting on global macro at a difficult time for the strategy, which accounts for some 20% of hedge fund assets globally. The HFRI Macro (Total) Index fell 0.2% in 2013, was flat in 2012 and lost 4.2% in 2011. Its last positive showing was in 2010, when it rose 8.1%.

Leucadia, a diversified holding company whose businesses range from mining to beef processing, entered the financial-services arena last March with its purchase of Jefferies. Just a few months later, Leucadia bought hedge fund backer Topwater and set up an asset-management unit to house the new business. Topwater’s founders, Bryan Borgia and Travis Taylor, are known for pioneering first-loss seed investments in startup fund operations — deals that require the managers to absorb any losses. As of October, the Topwater team was managing $50 million.

The global-macro business represents the asset-management unit’s second division after Topwater. Overseeing the unit is longtime Leucadia executive Marc Fuller.

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