NewSmith Capital Partners, the investment management and advisory shop launched last year by a team of senior Merrill Lynch alumni (DW, 5/5), is preparing to launch a range of hedge funds and is setting up the framework to offer derivatives to its clients. The firm is being keenly watched because of the stable of derivatives, investment management and advisory talent it has assembled. "These guys aren't going to do something small," said a credit head at a rival firm.
The investment management arm, NewSmith Asset Management, plans to launch two hedge funds and has already started marketing the first, a long-short equity fund run by Steve Thompson, a former head of the U.K. specialist equity team at Merrill Lynch Investment Managers. It will also set up a credit arbitrage fund in the summer, which Nick Senn, former head of fixed income debt capital markets at WestLB, will run. The firm is aiming to raise several hundred million dollars in each of the funds.
The advisory arm, NewSmith Financial Solutions, also has big plans and clients signed up. The holding company already has a capitalization of nearly USD100 million and some of this could potentially be used as a balance sheet for derivatives transactions.
NewSmith wants to be the best player in balance sheet restructuring and optimization in a handful of industries, including utilities, transport and pharmaceuticals. A market official likened the strategy to that of Blackstone, which founded a restructuring group in 1991 that has become one of the most widely respected on Wall Street.
NewSmith Financial Solutions will also use its derivatives, credit derivative and structured finance expertise to help clients with poorly performing structured product portfolios. For example, investors who bought synthetic collateralized debt obligations three or four years ago are suffering massive losses and many are attempting to sell the deals back to the investment banks at a huge loss. The firm is helping them explore alternatives, such as restructuring the portfolios.
--J.C.