Four fixed-income veterans are in the process of setting up a hedge fund that will make investments in mortgage-backed and credit instruments. The fund manager, dubbed The Sparta Group, will launch its first fund later this quarter, according to Derivatives Week, a BW sister publication.
The Sparta Group is being set up by Lawrence Rhee, head of foreign exchange options trading at Société Générale in New York, and three other partners: Jae Choi, head project manager in charge of a $40 billion plus mortgage fund at Western Asset Management; David Choi, v.p. at Texas Pacific Group; and Henry Chyung, managing director at Post Advisory in Los Angeles.
"The lack of correlation between these sectors allows us to expand the universe which we can glean for superior relative value strategies," Rhee said, referring to corporates and MBS.
Choi will head the MBS side of the fund and will use his derivatives expertise to enhance mortgage hedging and rates strategies. Chyung will head the corporate credit side.
Rhee said Sparta differs from other relative value funds because it focuses on trade construction. "When things break down, a trade construction that correctly matches its risk/reward will usually be one's first line of defense," Rhee said, adding this involves proper sizing and hedge ratios. "We always want to be in a position where we can deploy capital when others are cutting their positions," he noted.
Rhee said the fund will grow to six staffers in May, adding an MBS and operations expert, but declined to give names.
