LONDON (Reuters) - BlackRock’s former head of European fundamental credit is preparing to launch his own hedge fund next year in what is likely to be one of the year’s biggest debuts, three sources with knowledge of the matter told Reuters.
Michael Phelps, 43, oversaw $35 billion across a number of credit, leveraged finance and credit alternatives portfolios at BlackRock, the world’s biggest asset manager.
Tresidor Investment Management will launch in the second quarter and invest across European high-yield bonds, leveraged loans, convertible bonds and sovereign debt, aiming to profit from changes in central bank policy, inflation and diverging financial regimes, one source said.
Credit hedge funds took in $4.8 billion in investor cash between January and September, data from industry tracker eVestment showed, second only to inflows into equity funds.
Tresidor plans to join the exclusive club of funds running more than $1 billion in assets over the medium term and was “progressing extremely well” toward the target, one source told Reuters.
Estimates of the fund’s size at launch varied, with a second source familiar with the matter suggesting a $750 million start, while a third said it would be closer to $300 million.
In any case, that would likely put Tresidor among the biggest hedge fund launches of the year globally. Of 590 launches in 2018, just four started with more than $300 million in assets under management, data from industry tracker Preqin showed.
“He has a very good reputation and a lot of support,” one investor said, while a second described him as “awesome”.
Two hedge fund strategies run by Phelps at BlackRock averaged returns in the high teens while a lower-risk, retail-friendly fund made mid- to high-single-digit percentage gains, the first source said.
A spokesman for BlackRock declined to comment on the assets overseen by Phelps or his fund performance during his time at BlackRock.
Tresidor will launch with a team of at least 15 people, one of the sources close to the firm said, an unusually large staff for a start-up, pointing to confidence in the amount of money the firm will have in place.
Few hedge funds with $500 million or less in assets under management employ so many people, with just 15 percent employing between 11 and 20, research from trade body AIMA showed.
Joining Phelps as co-founder and CEO is Edgar Senior, 43, previously at hedge fund Marble Bar Asset Management, according to his LinkedIn profile, and Goldman Sachs and Credit Suisse, according to filings with the British regulator.
Mike Srba, whose British regulatory filings show he formerly worked at hedge fund giant Millennium Capital Partners and BlackRock, will also join as a trader, the first source told Reuters.
Phelps declined to comment on the launch.
Reporting by Maiya Keidan, additional reporting by Abhinav Ramnarayan; Editing by Georgina Prodhan