09/23/2011

Seer Playing Catch-Up as LibreMax Gains

Former Deutsche Bank executives Greg Lippmann and Philip Weingord have seen their fortunes diverge in the past two months.

The ex-colleagues, who now each runs his own structured-product hedge fund, both took losses in June — with Lippmann’s LibreMax Partners vehicle declining 2.7% and Weingord’s Seer Capital Partners Fund dropping 1.4%. But Lippmann has been on a winning streak since then, while Weingord’s performance has continued to slide.

Lippmann, whose management shop is dubbed LibreMax Capital, posted gains of 0.7% in July and 1.2% in August. The firm’s fund now is up 5% for the year. Weingord’s Seer Capital was down 0.6% in July and 4.1% in August, but still showed a 2011 profit of 3%.

The differing performance in part reflects some well-timed moves in which LibreMax responded to the past few months’ financial-market volatility by trading more frequently, along with a decision by Seer to ride out the gyrations. LibreMax traded in and out of 34 positions in August, for example, split evenly among purchases and sales. Along the way, the firm shed exposures to mortgage bonds while adding bets on securities backed by credit-card accounts, private student loans and manufactured-housing loans.

Nonetheless, Seer is confident its strategy will prove a long-term winner as values eventually rise among its targeted structured products — which encompass a range of asset-backed securities and residential and commercial mortgage bonds.

“The recent price declines in securitized products have been some of the most dramatic since 2008, which presents an opportunity rather than a harbinger,” research chief Karen Weaver wrote in a July letter to investors. “Unlike 2008, when short sellers were shorting par bonds, we are post-apocalypse and the bubble has already burst.”

Both managers’ returns trail Hedge Fund Research’s Fixed Income/Asset-Backed Index, which is up more than 6% this year following small losses in June and August.

On the capital-raising front, LibreMax’s assets have grown to $865 million. Seer hasn’t been as quick to accumulate capital, with $200 million in its flagship fund to date. The firm also raised $200 million for a vehicle that financed its purchases via the Federal Reserve’s Term Asset-Backed Securities Loan Facility. That entity is now unwinding due to the expiration of the Fed program.

Both firms have been closely watched since their launches, LibreMax in 2010 and Seer in 2008. Before starting LibreMax with four partners, Lippmann led Deutsche’s asset-backed bond trading team — a role in which he turned a $2 billion profit in 2007 via short sales of subprime-mortgage bonds. Weingord, who counts a number of former Deutsche colleagues as part of his team, headed capital markets in North America for the bank.

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