Evanston, Ill.-based Magnetar Capital has raised north of USD500 million for a long/short mortgage fund to trade derivatives and underlying in primary and secondary asset backed securities and ABS collateralized debt obligations. As part of the push, Mike Henriques, managing director in the securitized products group at Deutsche Bank in New York, has been hired as co-head of structured credit with Jim Prusko in the hedge fund giant's New York office.
Founded by former Citadel Investment Group and Glenwood Capital Investments alums just over a year ago, the fund has gained a reputation for its massive appetite for ABS CDO equity and its contribution to spread tightening last year when it bought a series of equity tranches from CDOs priced over USD1 billion (DW, 8/11). The fund, called the Constellation Funds, closed last month and will deploy similar ABS investment strategies to the firm's main fund, Magnetar Capital Master Fund. Officials at Magnetar declined comment. Joining Henriques from Deutsche Bank will be associate Kurt Palmer. Henriques is on gardening leave and could not be reached.
Although the subprime mortgage market has taken a pounding and the ABX index has plummeted over the past month, Magnetar and other managers may have weathered the storm. They bought the equity of so-called triggerless CDOs, which pay high coupons no matter the capital losses, and went short the mezzanine tranche of the same CDOs.