George Weiss Associates, an equity-based hedge fund in New York, is starting a high-yield effort that will take positions in bonds and credit derivatives. The hedge fund has hired two high-yield pros fromSteinberg Priest & Sloan Capital Management, a fund manager that recently closed its high-yield operation. Orest Stelmach, high-yield portfolio manager, and Andrew Okun, senior analyst, started in recent weeks at George Weiss in similar capacities.
Stelmach said he and Okun have developed a hedge fund strategy they plan to implement at George Weiss. "We are going to be investing in the long side in free cash flow generating companies and hedging that with short sales of companies that either have flawed business plans or are not generating free cash flow," Stelmach added, although he declined to specify what a typical trade would be or which companies would be used. The strategy also does not have a target mix for long and short positions. He said the strategy should work because "the high-yield market is so inefficient. Investors chase yield and often the good goes down with the bad and the bad goes up with the good."
Stelmach spearheaded the high-yield bond team at Steinberg Priest, which was a small effort started two years ago and part of $2 billion in total assets. Stelmach said he envisions a team of four to five professionals, made up of four analysts and one assistant portfolio manager. The strategy should appeal to alternative investors looking for a lower volatility investment that can return 10-12%.
Michael Steinberg, managing partner at Steinberg Priest & Sloan, did not return calls by press time.