BOSTON May 21 Hedge fund 400 Capital returned
3.26 percent during the first three months of 2014, beating its
benchmarks as bets on residential mortgage backed securities
The firm, founded five years ago and run by Chris Hentemann,
told clients in its first quarter letter seen by Reuters, "The
overweighting to RMBS (residential mortgage-backed securities)
drove absolute returns for the fund in 1Q14."
The fund's gains beat the HFRI fund weighted composite
index' 1.1 percent return as well as the Barclay's U.S.
Aggregate return of 1.84 percent. Last year the fund returned
15.23 percent and its average annual return is 20.43 percent.
The fund still has the bulk of its assets, 68.13 percent, in
residential loans, but the exposure has been reduced some since
the end of last year when the fund had 72.82 percent of its
assets in RMBS.
Improving fundamentals, including fewer first time defaults
and fewer nonperforming loans, have kept the sector attractive
even as the pace of home sales has slowed some in the last
weeks, Hentemann wrote.
During the quarter, Hentemann and his team focused on
rotating out of higher dollar, lower yielding positions into
lower dollar positions with room for prices to climb. The
average dollar price for sales was just above $80 while the
average price for new purchases was just under $53.
The fund, which has $990 million in assets, now employs 29
people, including 14 investment professionals.
"We have succeeded in deploying capital carefully and
rotating across all the structured credit sub-sectors as our
capital base and team has grown prudently," Hentemann wrote. He
underscored the fund's low volatility profile and its low
correlation to fixed income and equity markets.
400 Capital hired Emir Boydag as director of risk
management, John Nusbaum as director of distressed credit and
Tim Lynch as director of marketing and investor relations.
(Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman)