Josh Birnbaum’s Tilden Park Capital Management now boasts one of the best-performing hedge funds this year.
Tilden Park Offshore Investment Fund gained 12.84 percent through October, putting it in the top 20 of fund managers by performance, according to HSBC’s weekly report of hedge fund returns.
The $4.36 billion multistrategy credit fund gained 2.44 percent in October, a month when many other hedge funds lost money during the market’s downturn. The firm declined to comment.
Tilden Park’s gains this year have been driven, in part, by the rally in Puerto Rico’s Cofina bonds, those secured by a slice of the island commonwealth’s sales taxes. Those bonds had tanked last year, following Hurricane Maria, amid calls for the debt to be canceled.
Since that period Birnbaum added to his Cofina position, increasing his stake more than 50 percent, to $757.02 million from $501.29 million last year.
With nearly $4.4 billion in assets under management, that makes the face value of the Puerto Rico bonds account for about 17 percent of the portfolio.
Tilden Park has been one of the leaders of the Cofina group of bondholders, which also includes Baupost Group, Golden Tree Asset Management, and Whitebox Advisors.
This summer, the commonwealth of Puerto Rico reached a deal with the Cofina bondholders that would allow the owners of the Cofinas to claim 53.65 percent of the island’s pledged sales tax revenue — which comes to about 12 percent of the sales tax initially. That will pay for 93 percent of the value of the senior Cofinas. The subordinated securities would get 56 cents on the dollar. Those bonds traded in the teens in the throes of the crisis, with the senior Cofinas trading in the low 40s.
The deal, which has also won the support of the board overseeing Puerto Rico’s bankruptcy, is expected to be approved by the court in January. As a result, the bonds have rallied, with senior Cofinas now trading at about 80 cents on the dollar.
Birnbaum started Tilden Park after leaving Goldman Sachs, where he had been the co-head of Goldman’s structured products group and became famous for the $3.7 billion gain he made for the bank shorting subprime mortgages. He was also one of the Goldman executives hauled before Congress, where he was asked to explain why he was shorting the bonds when Goldman was selling them.
He left Goldman in the spring of 2008 and later launched Tilden Park. He was joined by Jeremy Primer, a Goldman research strategist, and Sam Alcoff, who was technology and risk management group at New York–based hedge fund firm Drake Capital Management, and previously with BlackRock.
Birnbaum serves as the firm’s CIO, Primer is head of research and chief risk officer, while Alcoff is the COO and CTO.
Since inception, Tilden Park has produced an annualized return of 14.50 percent, according to HSBC.
