Deephaven Capital Management, a subsidiary of Knight Trading that provides asset management services to institutional and high-net-worth investors, has started to include distressed debt in its trading operations with a team of three from American Express Asset Management Group. Deephaven has brought on board John Engelen, a former senior portfolio manager to the distressed debt group at AMEX, to act as a trader for the Deephaven Market Neutral Master Fund. Peter Glerum and Brad Bauer, former analysts at AMEX on the credit opportunities hedge fund, have also moved to Deephaven, based in Minnetonka, Minn. Engelen and Deephaven officials declined to comment.
The source said prior to Engelen's arrival earlier this year, the firm was not involved in distressed debt. But it is trying to beef up its offerings and is pursuing an intra-capital structure arbitrage strategy, he said. For example, Deephaven is investing in distressed or bankrupt companies, going long bonds, investing in the operating company level or the holding company level, he explained. Engelen joined American Express from Salomon Smith Barney, where he was head of the distressed debt group. Prior to that he was at Merrill Lynch, managing distressed credit investments.
Another source said that Engelen's departure from AMEX is just one of many portfolio managers and analysts the firm has lost on the bond and hedge fund side. "There is new management in town, that are doing things differently," he said. It could not be ascertained if AMEX is still involved in distressed debt. An AMEX spokeswoman declined to comment on personnel matters.