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Chicago Start-Up Readies Hedge Fund

11 Mar 2005

A former Zurich Scudder Investments portfolio manager plans to launch a fixed-income arbitrage fund.

Dan Timotic
A former Zurich Scudder Investments portfolio manager plans to launch a fixed-income arbitrage fund. Chicago-based DMT Capital Management is in the process of raising seed capital for a long/short strategy, said Dan Timotic, founder and managing partner, who is looking to kick off the effort in the second quarter. Timotic is launching the fund because he said investors are seeking higher returns than traditional fixed-income funds offer, but with lower volatility than equity hedge funds have.

The fund, which is shooting for $50 million in seed capital, will invest in investment-grade fixed-income, including asset-backed securities, commercial-backed securities, corporates, agencies and Treasuries. The fund will be two to three times levered. Timotic said he will capture spread anomalies in issuances that are too cheap or rich by going long and short these bonds. He will strip out credit risk by buying or selling credit default swaps. Timotic said he would not short structured products because of their illiquidity. Therefore he would go long structured products and could short corporate bonds, Treasuries or agencies, depending on if he had a view of a sector or wanted to hedge out his interest-rate risk.

Timotic was previously an investment-grade portfolio manager at Zurich Scudder, which he left in 2002. He said he is seeking investments from institutional and individual investors.

11 Mar 2005