Jeff Maillet and his four-person team have joined FrontPoint Partners after departing Nuveen Investments last month, and are preparing to launch a distressed debt fund. Eileen Rives, Gregory Bunk, Lisa Mincheski and Steven Hill, have joined the Greenwich, Conn.-based firm, which has plans down the road for collateralized debt obligations and a slew of loan investment strategies. Philip Duff, the former ceo of Van Kampen Investments and now partner and chairman at FrontPoint, said the new fund will be a "classic distressed debt product" with three parts: distressed workout situations, value investing, and an intra-capital structure using arbitrage. Calls to Maillet were referred to a public relations agency for FrontPoint and were not returned.
FrontPoint is in the market now raising money through a private placement, Duff said, and so he could not comment on the size of the fund and timing of its launch. XL Capital, an insurance and reinsurance provider, has committed to invest $500 million in FrontPoint strategies, as they are launched, he said. He said the fund's initial approach will be followed by another 15 to 25 strategies. "Over the next three to four years, FrontPoint expects to have 100-150 people."
Duff said Maillet's track record at Van Kampen was a prime driver in bringing him aboard. "I got to know Jeff initially when we were doing due diligence to buy Van Kampen. Jeff's funds were producing 40% of the profits of the place." Maillet was among the first group of investors to buy bank loans off the balance sheet. His team has worked together for 10 years and managed $14 billion at Van Kampen. Benjamin Klaas, formerly of LaSalle Bank will also be a part of the group, he said.
Duff broke down the new fund. The workout component would focus on companies already in bankruptcy, with Maillet sitting on the workout teams. This will be an important piece but will not predominate in terms of assets, he noted. The value approach will deal in credits not in bankruptcy. The fund will take this approach across all sectors, but there will be teams internally, understanding the credits, Duff explained. Lastly, the fund will employ an intra-capital structure using arbitrage. "For example, long on bank debt and short on equity." He noted how last year emerging markets telecom debt went down earlier in the year than equity. FrontPoint will also have a fixed income relative value fund, run by a team of three formerly of West End Capital Management.
When Maillet left Nuveen some market players speculated the firm was looking to de-emphasize the loan funds, which had been performing poorly this year. One banker stated the firm never really committed to the market and the replacement of the loan team by Symphony Asset Management, left some wondering about the future direction of Nuveen (LMW, 11/5). One investor suggested the fixed-income specialists might look to develop relative-value funds containing bonds and loans.