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93. MKP Capital Management / $6.26 billion

Location:

New York, NY

Founded:

1995

2016 Hedge Fund 100 Rank:

No. 85

2016 Capital:

$8.06 billion

2015 Hedge Fund 100 Rank:

No. 82

2015 Capital:

$8.36 billion

Years on List:

Website:

www.mkcap.com

Address:

600 Lexington Avenue, 18th floor
New York, NY 10022

Phone:

212-303-7100

Fax:

212-303-7196

Profile & News

Firm Overview

MKP Capital Management, named for its founders Patrick McMahon, Eric Keiter and Maurice (Chip) Perkins, keeps a low profile, but when it gets media attention, it’s for all the right reasons. The macro and credit-focused hedge fund firm was one of the best-performing hedge funds following the 2007 market meltdown, producing 22.6 percent gains through August of that year thanks to plays in the U.S. mortgage-backed securities market. Its credit fund was flat the following year, only to gain 17.1 percent in 2009. The global macro MKP Opportunity fund was up 9.8 percent in 2008 and 12.8 percent in 2009. The firm’s first down year was 2011, when the credit funds were pummeled by losses in bonds tied to U.S. real estate loans and declined by 4.8 percent in the first half of that year.

That year notwithstanding, CEO and co-CIO McMahon, the only founder still with the firm, has kept the winning streak running. Assets grew by 31.6 percent in 2013, with the $4.8 billion MKP Opportunity fund and $2.4 billion MKP Credit fund rising 7.09 percent and 11.15 percent, respectively. In January 2013, Dyal Capital Partners, a private equity fund managed by Neuberger Berman, bought a passive, non-voting minority stake in the fixed-income specialist. Firmwide assets slipped a modest $63 million in 2014. MKP Opportunity fell 2.17 percent that year while MKP Credit jumped 5.34 percent.

McMahon worked nine years at Salomon Brothers as a managing director in the fixed-income capital markets and headed the collateralized mortgage obligations trading and structuring desk before co-founding MKP in 1995. He made his first and only appearance on Alpha’s Rich List Second Team in 2013, earning $120 million. That same year MKP Capital made its Hedge Fund 100 debut at No. 87, with $6.4 billion under management. Keiter, who was a principal at the firm and co-headed investing and risk management of MKP Partners and MKP Opportunity funds while supervising risk management for the MKP Credit fund, left in 2006. He founded a livery-cab leasing company several years later and in the fall of 2013 started New York-based Shadow Tree Capital, an asset management firm focusing on consumer debt and loans to small and mid-size businesses. Perkins, who worked for 13 years at Salomon Brothers before co-founding MKP and serving as senior relationship manager, retired at the end of 2011.

Strategy

The firm holds long positions in alternative investments across global markets, focusing primarily on global macro and credit strategies. MKP Capital invests in U.S. and global rates, emerging markets, foreign exchange, structured and corporate credit, equities, currencies and commodities strategies. The investment process is driven by fundamental top-down macroeconomic research.

Funds Overview

The firm receives a monthly or quarterly management fee based on net asset value and an annual incentive allocation, subject to a high-water mark.

The MKP Credit fund, founded in March 1999, has produced an annualized net return of 11.19 percent since inception, as of December 31, 2014.

The MKP Opportunity fund, founded in August 2001, has posted an annualized net return of 8.84 percent since inception, as of December 31, 2014.

MKP does not enforce a minimum initial investment in a fund managed by the firm but the MKP Funds have a minimum initial subscription ranging from $5 million to $25 million.

Clients

The firm manages private investment partnerships and separate accounts for institutional investors, pension plans, charitable organizations, high-net-worth individuals, investment companies and trusts, among others.

Among MKP’s largest investors are the California State Teachers Retirement System, the State of Wisconsin Investment Board and the New Jersey Division of Investment.

Regulatory Assets Under Management (RAUM)*
Discretionary	$22.56 billion (in 22 accounts)
Nondiscretionary	$0 (in 0 accounts)
Total	$22.56 billion (in 22 accounts)

Employees	104
Clients	11â€“25 total	81 percent non-U.S.
Fiscal Year Ends	December
All data as of December 31, 2014. *Regulatory Assets Under Management (RAUM) includes no deduction of offsetting liabilities, thus representing gross AUM, not net AUM. RAUM calculations include leverage, proprietary assets and uncalled capital commitments, among other items not required in the calculation of AUM.

Owners and Executives

Name	Position	Position Held Since
Patrick McMahon	Founder, CEO, Co-CIO, Managing Member	09/1995
Thomas Devita	CFO, COO, Managing Member, Director of MKP Capital UK	07/2010
Steven Lando	General Counsel, CCO	01/2013
Henry Lee	Managing Member, Chief Risk Officer	01/2013
Richard Lightburn	Managing Member	01/2013