BOSTON Jan 24 Richard Schimel, back in the hedge fund business after the U.S. government's insider trading probe helped force him to shut down Diamondback Capital, sees a chance to make money in certain financial stocks this year.
Although he did not identify his picks by name, Schimel wrote in a letter to clients that investment banks with little exposure to fixed income trading and restructured retail focused banks are poised to outperform their peers. A copy of the letter, dated Jan. 23, was seen by Reuters on Friday.
The outlook for more loan growth this year could help certain regional banks, the letter said.
Also the chance for more mergers and acquisitions, plus share buy backs, are making certain names in the media and telecommunications sector attractive, the letter added.
Schimel wrote that Sterling Ridge, his new firm, now has $150 million in assets, and that it returned 1.3 percent in the last two months of 2013, after officially launching in November. In the first nine months of 2013, 816 new hedge funds were launched while 608 closed down, data from Hedge Fund Research show.
Diamondback Capital, which once had $6 billion in assets, was shut down in December 2012, becoming an early victim of a broad probe into insider trading at hedge funds. Last year, SAC Capital Advisors, where Schimel got his start in the money management business, pleaded guilty to criminal charges of insider trading.
Neither Diamondback nor Schimel were ever charged with any wrongdoing, but the arrest of Todd Newman, a former Diamondback portfolio manager who has since been convicted of insider trading, prompted clients to redeem their money. Assets dwindled to $1.45 billion.
In founding Sterling Ridge, Schimel did not reunite with any of the men he co-founded Diamondback with, but hired one of his former investors, Prashant Kolluri, as the new firm's president and chief operating officer.