Judah Frankel, the inventor of the planned amortization class (PAC) bond, has re-emerged with a new firm, Fibonacci Capital. He is in the process of selecting a prime broker ahead of the launch of his Fibonacci Capital Fund in the fall.
Frankel's new firm, named after the famed medieval mathematician Leonardo Pisano Fibonacci, will invest in the high-yielding off-the-run tranches of collateralized residential mortgage obligations such as inverse interest-only obligations. The fund will invest in both agency and AAA non-agency deals. This will not use leverage and will have no or low directional bias, Frankel said. The fund will mark its bonds by using the average of at least two dealers' marks, he added. It will also rotate the dealers.
Frankel is considering hiring Bear Stearns or ABN AMRO as prime brokers, he said. A spokesman for Bear Stearns did not return calls by press time and an ABN spokesman had no immediate comment.
Frankel invented the PAC bond, which is a collateralized mortgage obligation that pays principal based on a predetermined schedule, while he was head of the CMO arbitrage desk at Morgan Stanley in 1986. More recently, he was a portfolio manager of a fund backed by quantitative hedge fund powerhouse Renaissance Technologies. Frankel ran Matrix, a hedge fund that was set up and marketed by Renaissance, from 1995 until 2000.
