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May 18, 2016  

Whitebox Offering Comes With Long Lockup

Whitebox Advisors is marketing a structured-credit-product fund with a long lockup period.

Whitebox Term Credit Fund would carry a three-year term during which investors would be unable to withdraw capital and all income would be reinvested, followed with options for two extensions of one year apiece. It is expected to launch by June 30.

While Whitebox occasionally has utilized such terms in the past, its vehicles mainly have adhered to more typical open-end structures with standard hedge fund lockups and withdrawal provisions.

The new fund would have the capacity for up to $400 million of limited-partner capital, with a minimum contribution of $10 million — suggesting that the offering is geared toward institutional backers. The aim is to capitalize on pricing dislocations by taking long positions in collateralized loan obligations, residential mortgage bonds and other structured products Whitebox sees as undervalued.

Minneapolis-based Whitebox already employs a similar strategy within its flagship Whitebox Multi-Strategy Partners, along with its Whitebox Asymmetric Partners, Whitebox Relative Value Partners and Whitebox Credit Partners vehicles. That strategy has produced an annualized return of 21.1% since its inception in 2010, with double-digit gains every year except 2015 — when it was up 5.1%.

The new fund would be run by an experienced team encompassing five portfolio managers and an analyst, including personnel involved in Whitebox’s existing structured-product investments.

The effort follows a short-lived move by Whitebox in late 2014 to start a fund called Whitebox Special Opportunities Fund E that also would have broken out a strategy used by Whitebox Multi-Strategy Partners. That vehicle would have taken short positions in European government bonds while going long on U.S. Treasurys. But the firm wound up scrapping the offering, determining that the main fund’s exposures were sufficient.

Whitebox has $3.9 billion under management. The firm was founded in 2000 by Andrew Redleaf.