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Gottex to Debut With Hedge Fund Offering
Asset Backed Alert, Harrison Scott Publications Inc. (August 19, 2005)
Alternative-investment shop Gottex Fund Management wants to sell bonds tied to hedge funds.
The collateralized fund obligation is slated to hit the market via underwriter Lehman Brothers sometime before December. It will likely weigh in at $300 million to $500 million.
Details are sketchy, but if the offering follows the usual pattern, it would function like a so-called fund of funds - except that it would raise money selling both notes and equity. However, the vehicle could invest in loans to hedge funds instead. Either way, such a transaction would seem to be a natural fit for Gottex, which routinely analyzes hedge funds. The firm's main line of business is setting up and running alternative-investment products that invest in those vehicles.
Gottex is based in Lausanne, Switzerland, but it's likely that the firm's New York team is the one working on the deal. If that's the case, structured-product chief Steve Oristaglio is probably involved. He joined Gottex in late April, about two months after giving up his post as Boston-based Putnam Investments' head of investments.
Oristaglio's arrival was part of a larger effort to broaden Gottex's investment-product offerings, chief executive Joachim Gottschalk declared at the time. The firm also wants to double its assets under management within five years, to $10 billion, he said.
Collateralized fund obligations, an outgrowth of the once-dormant field of market-value collateralized debt obligations, have caught the eye of many prospective issuers over the past few years. The deals' relatively low cost of funding is among their main draws. The products can also be attractive to investors because they give bondholders exposure to a variety of hedge funds that they might not be able to access directly.
But actual deals have been few and far between. The transactions can be a tough sell because many traditional CDO buyers are fuzzy about how to evaluate them. And the underlying hedge fund managers usually don't help, since they are notoriously secretive. Potential investors also worry that it would be difficult for the securitization trust to get out of hedge funds that run into trouble.