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June 21, 2017  

Bossen Pulls Back From Convertible Arbitrage

Elliot Bossen is retooling his Silverback Asset Management.

Long known as a convertible-bond arbitrage specialist, Bossen is repositioning the New York firm as an opportunistic credit investor. The transformation began around yearend when Bossen liquidated the last convertible-arbitrage positions in the flagship Silverback Arbitrage Master Fund. In April, the firm rechristened the vehicle Silverback Opportunistic Credit Master Fund. A marketing campaign got under way last month.

The fund’s longtime portfolio manager, Dan Magid, left the Chapel Hill, N.C., firm in the past month or so. He was replaced by Robert Barron, who joined Silverback in 2013 to develop the opportunistic credit strategy.

The fund’s track record goes back to 2006, when it launched with seed capital from Investcorp. Its recent performance is unknown, but a source described it as “low.” As of November 2012, it was showing a 16.5% annualized return.

The opportunistic credit strategy, meanwhile, has generated an 8.8% annualized return since 2013, versus 4.4% for the HFRI Credit Index.

Silverback had been among a few remaining hedge fund managers dedicated to convertible-bond arbitrage, a once-fashionable strategy that fell out of favor during the financial crisis. Its flagship fund lost 20.6% in 2008 — better than some of its peers — and it rebounded with a whopping 142% gain in 2009. But in the years since, the performance of most convertible-bond arbitrage funds has suffered amid historically low interest rates and steadily rising stock prices. Convertible arbitrage typically entails buying a convertible bond while shorting the issuer’s stock.

Bossen still manages a convertible-arbitrage book for a separate account, and Silverback’s investment team may occasionally pursue the strategy if the opportunity warrants. But for the most part, Silverback Opportunistic Credit Master Fund will invest in bonds and loans in the U.S. via a mix of active-trading and long-term directional strategies.

The fund had $153 million of gross assets as of March 1, down from $1.6 billion in 2014. Silverback’s overall gross assets totaled $645 million at the beginning of March, including two separate accounts.

Bossen founded Silverback in 2002. Magid, who had been on board since 2003, told industry contacts he left to take some time off. Other recent departures include chief risk officer Greg Somer and analysts Tom Loughrey and Kurt Euler.

Barron, who took over as portfolio manager for Magid, has been running the credit strategy via a separate account since 2015. His resume includes Southpaw Asset Management and RBS Greenwich, as well as his own fund shop, Cerro Capital.