Photo: Daniel Goodman / Business Insider
Ever since word got out that hedge fund BlueMountain Capital Management was helping JP Morgan exit its ugly $6 billion trading loss last year everyone has been wondering exactly what the firm does.Well Bloomberg Markets Magazine has a deep dive into the hedge fund, helmed by Harvard Law graduate Andrew Feldstein, and to put it gently, they’re basically one of Wall Street’s trash compactors.
And, by the way, when Bloomberg Markets last checked on the fund in October it was up 13.6% for 2012, so that strategy is working.
Feldstein is betting that BlueMountain can make money on assets that banks no longer want to own and on loans that banks no longer want to make, according to an October marketing document for the new fund obtained by Bloomberg Markets. As banks shed risky assets, Feldstein is making money picking through these flea markets of finance. “This market will continue to grow,” says Paul Rowady, a senior analyst at research firm Tabb Group LLC in Westborough, Massachusetts. “Their intuition to be a leader is spot on.”
One man’s trash is another man’s treasure.
But here’s the thing: Feldstein was on the JPMorgan team that helped create the credit derivatives market in the early 1990s. He knows that market like he knows the back of his hand. As Bloomberg Markets put it, having him unwind your complex credit trade “is like having a tall green monster on the loose and calling in Dr. Frankenstein to deal with it.”
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