Atalaya's Zinn says tough times for raising cash
NEW YORK (Reuters) - Investment opportunities have never been so abundant for Atalaya Capital Management, a hedge funds that buys loans and other debt at bargain prices, but attracting new capital is not so easy these days.
Atalaya, which has invested more than $2 billion since opening its doors in 2006, launched its second Special Opportunity fund in January, promising investors at least 15 percent annual net returns in any market environment.
Yet Chief Executive Ivan Zinn said the firm has slowed its fund-raising efforts so it can build a track record. Eventually, Zinn intends to assemble a $250 million fund.
"We're not actively marketing. We want to show some investing results, give a flavor of the risk-return profile," he said at the Reuters Private Equity and Hedge Funds Summit in New York.
Atalaya, which means "watchtower" in Spanish, takes advantage of the scarcity of traditional bank financing by providing credit to small and mid-sized companies and by acquiring debt from distressed sellers.
As an example, Zinn described his firm's purchase of equipment leases held by a highly rated company that was eager to clean up its balance sheet.
There are numerous opportunities in the corporate loan markets, he said, "where the baby is being thrown out with the bathwater."
Yet last year's market slump, along with disappointing losses from hedge funds, have caused many investors to shy away from investing in funds. Only the biggest, established firms can attract capital.
"It hasn't changed. With track records, longer is better. Better is better," he said.
With that in mind, Zinn said Atalaya will make some initial investments and generate some gains that it can then show to investors.
"The amount of dollars for seeding new hedge funds is clearly limited," he said. "It will go back to the mid-90s, where if you had $50 million you knew they were talented. If you see a launch in 2009, that's a high bar."
In addition to raising money, Atalaya is hiring staff.
"It is an opportunistic time to add new people," Zinn said.
(Editing by John Wallace)
