A $9 billion North Carolina-based manager of managers signs Sam DeRosa-Farag, a prominent veteran of the credit markets.
The harsh credit markets of 2008 tested even the most veteran of investors, but Sam DeRosa-Farag isn’t getting out.
Quite the opposite.
DeRosa-Farag recently joined Chapel Hill, North Carolina-based Morgan Creek Capital Management to spearhead its new focus on fixed-income investing.
“Credit is a hot commodity,” says DeRosa-Farag, a principal and strategist with the firm. “Everyone is looking at it.”
He is quick to add, however, that the market hasn’t grown crowded. With valuations so low right now, DeRosa-Farag sees a huge opportunity. He believes that within the next year or two, smart credit investors could garner traditional equity-like returns.
Working out of New York, DeRosa-Farga brings to Morgan Creek a deep knowledge of the fixed-income sector. He was a member of Institutional Investor’s All-America Fixed-Income Research Team from 1992 to 2006 and is a former co-head of high-yield research at Credit Suisse. He began his career on the high-yield desk at New York-based Chase Securities.
Today he says fixed-income credit is a more dynamic asset class than it has been historically perceived, and that it offers multiple ways to manage risk and provide return.
A similar evolution in equities led institutional investors toward the endowment-style approach that Morgan Creek promotes. The strategy, characterized by a diverse and tactical allocation that includes a big commitment to alternative assets, has been under pressure of late. Last year Morgan Creek’s investor portfolios were down, on average, by 24 percent, but the firm is staying the course.
In an exclusive interview in the May edition of Alpha magazine, Morgan Creek co-founder and head of investments Michael Hennessy says his firm’s biggest mistake was not having enough insurance in its portfolio that could kick in during market extremes. But, he adds, no one could have foreseen the events of last year. “We didn’t imagine that the government would ban short-selling,” he says.
DeRosa-Farag also saw up close the hedge fund impact of the meltdown. Last year he was a principal at $2.75 billion Ore Hill Partners, a New York-based credit-focused firm that lowered gates and restructured its flagship fund after a rush of redemptions.
