NEW YORK, July 25 (Reuters) - Scoggin Capital Management, a $3.3 billion hedge fund firm, is facing a challenging year along with much of the hedge fund world, but its managers see lucrative opportunities ahead, according to July 15 investor letters.
The New York-based multi-strategy manager said it lost 4.22 percent in the first half in its flagship Scoggin Capital fund, but was up about 1.7 percent in its Worldwide Fund and up 3 percent in its Credit Opportunities Fund, according to the letters.
“Welcome to the bear market of 2008 — one of the toughest markets we have ever witnessed,” said Scoggin partners Craig Effron and Curtis Schenker, who founded the firm 20 years ago, making it one of the industry’s oldest.
The firm, which generated annualized returns of 18 percent from 1988 through 2007, said it expects the current downdraft across the financial markets to yield big opportunities in the coming year or two.
“Over our 20-year history, we have seen four markets that are similar to this one, albeit they were not as ugly. In each case, we made outsized returns in the ensuring years,” said Scoggin. “We fully expect this time will play out in a similar fashion.”
“We expect unbelievable opportunities to present themselves as this downturn plays out,” it said, but warned that “being too early is far more dangerous in this environment than being a bit late.”
Scoggin officials declined to comment.
The firm said it is increasing its allocations to credit strategies and reducing exposure to equities this year while keeping significant amounts of cash on hand for future buying opportunities.
Scoggin said it was hit by declines in Maguire Properties MPG.N, a real estate investment trust that dropped from around $30 per share in late December to $11.01 today. Scoggin was the third biggest Maguire holder as of March 31 with a 9.4 percent stake, according to regulatory filings.
“We are fully expecting the stock to recover over the next few quarters as the new management team implements its plan,” said Scoggin in the letters, which were obtained by Reuters.
It said it made money in the bank debt of Georgia Pacific and Charter Communications (CHTR.O).
“Once we are officially in a bear market, meaning down 20 percent, the bottom is not too far away,” said Scoggin. “As the general public and professionals alike begin to panic and dump their holdings, opportunities to make money will become easier.”
(Reporting by Dane Hamilton; editing by Gunna Dickson)
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