Another One Bites the Dust?

This one could hurt.

Not you. Or me. But John Devaney.

Devaney ``prides himself as a risk-taker, someone who sticks himself out there,’’ said David Castillo, who trades asset- backed, commercial-mortgage and so-called collateralized debt obligations at Further Lane Securities in San Francisco. Bloomberg

And if he eats his own cooking he likely has a case of indigestion.

John Devaney, who invests in subprime mortgage bonds, restricted redemptions to protect some of his Horizon Strategy hedge funds from being forced to sell assets.
It’s ``a defensive move because we had an unusually high number of redemption requests and we didn’t want to be a forced seller in this market,’’ Michael Gregory, a spokesman for Devaney’s United Capital Markets Holdings Inc., said in an interview yesterday. 

One of the investors who wanted to withdraw accounted for about 25 percent of the funds’ money. United Capital, based in Key Biscayne, Florida, oversaw $619 million as of March, including in the money-losing Horizon ABS Fund LP.

Marking to market is great, in theory. But there has to be a market.

In the case of subprime slime, a picture tells a thousand words.

Devaney has long feasted on the inefficiencies in the high-yield structured finance market. As he once put it:

“The secondary markets for some of these bonds have an incredible disconnect between the current trading levels and the fundamental credit quality of the collateral pools backing the securities.”

The problem is, those words were spoken in 2004.

Only the credit gods know what he is thinking now. Being a liquidity provider to the structured credit industry ain’t what it used to be.

Maybe Devaney’s acumen will bail him out of a jam. His top lieutenant, Sean Kirk, spent many years trading these products at the Bear and should know where the bodies are buried. Therein lies the rub?

Devaney’s star had a rapid ascent on Wall Street.

This is one star we do not want to see extinguished. Don’ t let them see you sweat, John.

United Capital’s Devaney Halts Hedge Fund Withdrawals
Bloomberg

Structured Credit’s King of Liquidity
US Credit pdf

--------------------------------------------------------------------------------------------------------------
The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.

Comments:

<< Back to main