Even by the increasingly institutional and large-scale standards of new hedge fund launches in the much-altered post-crisis industry environment, specialist London-based credit manager Goldbridge Capital Partners is creating something a little different.
Backed by Northill Capital – the private asset management investment business that is run by former BNY Mellon Asset Management vice-chairman Jon Little and funded by the wealthy Swiss Bertarelli family – Goldbridge is aiming to establish itself in fairly short order as a major new player in the fast-growing alternative credit investing space.
Its founding partners are certainly putting plenty of investment behind that aim. The business has £25 million of equity capital – way more than for the typical start-up investment manager – while the firm’s first two credit hedge funds launched with long-term committed assets of around $100 million from Northill.
Furthermore, Goldbridge’s investment and business management team already numbers 30 people – evidence of the deep and robust institutional infrastructure that has been built up in the time between the firm’s establishment in October 2011 and the roll-out of the two credit funds in June and July this year.
Founder and managing partner Gina Germano has first-hand experience of building a specialist asset management business from scratch. She also has 18 years’ experience of investing in European sub-investment grade credit, right from the earliest stages of the market’s development in the mid-1990s, when she ran one of the first dedicated European high-yield debt funds at Lazard Asset Management.
From Lazard she joined BlueBay – the specialist credit manager set up in 2001 by Hugh Willis and Mark Poole that was bought by RBC last year for just under £1 billion – soon after its launch and spent eight years as a senior principal there.
During that time she built up and ran the firm’s large and highly-profitable high-yield and distressed debt business – which was one of BlueBay’s main drivers behind its rapid growth and subsequent IPO in 2006, ahead of the problems that subsequently struck the publicly-quoted firm in and around the credit crisis – before leaving the group in 2010.
Over that period she saw the rewards, challenges and pitfalls involved in developing an independent investment firm – and the whole structure and ethos of Goldbridge draws heavily on the lessons that she and her partners have learnt over the years, as well as the broader structural and strategic changes that have swept the alternatives industry since 2008.
“We and our partners at Northill are taking a very long-term view,” says Germano. “There is no exit orientation here – we have tried to create a firm with real alignment of interests between the partners and our fund investors. No capital goes out of the business for at least five years and a central part of our philosophy is that asset management firms need to be private.”
She adds: “We spent the best part of a year before launching the funds making sure we had the best possible infrastructure – in terms of governance, controls, transparency and investor communication – as those are the true cornerstones of a sustainable asset management business these days.”
On the investment side, most of Germano’s core sub-investment grade team from BlueBay have been at Goldbridge since its formation – while fellow portfolio manager Dipankar Shewaram, who leads the investment grade team and runs the firm’s liquid credit hedge funds, also spent several years at BlueBay in its heyday.
Prior to the formation of Goldbridge last year, Shewaram had been the head of non-US credit at Western Asset Management – where he was responsible for more than $20 billion in total return and long-only assets across the investment grade, high-yield and emerging-market credit space.
And he previously spent six years at BlueBay from 2002 to 2008 as co-head of the European investment-grade team, running several billion dollars in hedge fund and long-only assets, after joining BlueBay in its early growth stage from Deutsche Bank.
Since the summer the firm has been up and running with its two debut credit fund strategies. Germano’s Goldbridge Credit Value fund – a value-driven strategy that focuses exclusively on European sub-investment grade credit – went live in June, while the firm’s Global Credit Opportunities fund – a liquid global credit-driven long/short macro strategy run by Shewaram – began trading at the start of July.
The two funds launched with combined initial assets of approximately $100 million from strategic partner Northill – and are now taking in capital from third-party investors at a time of fast-growing interest from investors in European and global credit opportunities across the spectrum from investment grade through high-yield to distressed debt.
With its substantial capital backing, its highly experienced investment team and its robust institutional infrastructure, Goldbridge clearly represents a major new addition to the investment grade and sub-investment grade alternative credit space – as a firm that aims to combine the advantages of a start-up boutique with the attributes of an established asset manager.
The founding partners have invested heavily over the past 12 months or so in building up the finance, compliance, operations, legal and corporate governance sides of the business ahead of the funds’ formal launch.
And considerable effort has also been devoted to ensuring that the funds are structured in ways that best align client interests with those of the managers – while the business operates with a strong partnership ethos, both on the investment and business management sides.
Besides Germano and Shewaram (who chairs the firm’s six-strong investment committee), other senior members on the 11-strong investment team include Thomas Naess, Nick Thomson, Samantha Wessels, David Klein and David Levenson – who have worked in the credit business for many years at leading firms including BlueBay, Western, Houlihan Lokey, Barclays, Goldman Sachs, Deutsche Bank and Rothschild.
The operational side of the business is headed by chief financial officer Scott Sanderson, who has previously worked in senior finance roles at BNY Mellon, WestLB Mellon Asset Management and Newton Investment Management.
The board of directors at Goldbridge comprises Germano, Sanderson, independent chairman Frank Dangeard and two representatives from Northill – Little and co-partner Jeremy Bassil – while Lisa McAnany, the firm’s head of legal, compliance and risk, and sales head Fahim Imam-Sadeque serve with Germano and Sanderson on the Goldbridge executive committee.
The Goldbridge principals believe that European credit investing over the next few years represents the largest investment opportunity in the past 50 years as the financial and corporate world readjusts to the long-term structural impact of the global credit crisis.
Bond issuance looks set to become an increasingly important alternative source of capital to bank lending at a time of European financial sector deleveraging, both for investment grade and sub-investment issuers – while regulation, dislocations and market inefficiencies are also set to create major new multi-year opportunities for credit investors.
Besides running the two hedge fund strategies, Goldbridge also plans to roll out other longer-term funds over the next several months that will enable the team to exploit the full range of liquid and illiquid opportunities across the credit and distressed spectrum.
Next on the launch pad is a longer-term vehicle called Spectrum, which will start early next year with a locked-in capital structure that will enable the Goldbridge team to pursue more illiquid investment opportunities without risking the kind of asset/liability mismatches that proved fatal to many credit strategies during the 2007/2008 liquidity crisis.
As a closed-ended vehicle with a longer-term structure, Spectrum will be able to invest in stressed and distressed European debt opportunities that may take longer to play out than a liquid credit strategy would allow – and also, where necessary, to take part in companies through private equity-style distressed and restructuring work-outs.
The new roll-out will complete the liquidity spectrum of Goldbridge’s investment vehicles – offering investors a range of products with different liquidity and investment features that are specifically targeting different types of opportunities in the diverse credit space.
Shewaram’s Global Credit Opportunities fund operates at the most liquid end as a liquid long/short credit-driven macro trading strategy, with monthly subscriptions and monthly redemptions.
GCO seeks to exploit fundamental and relative-value alpha and beta opportunities in global credit markets – targeting mainly the investment grade credit space, but also speculative and emerging market credits – and between asset classes such as bonds and equities.
Rooted in proprietary value-based research by Shewaram’s five-strong team of analysts and traders, the strategy also employs an active macro overlay strategy across rates, currency and equity markets, and will also use leverage on occasion to enhance value-driven opportunities.
Germano’s Credit Value fund is structured in a less liquid fashion – with redemptions being quarterly and with a one-year lock-up – to reflect its greater focus on deep value investing opportunities, with a preference for event-driven situations that can produce an attractive current income while the event or catalyst plays out for principal upside.
Although taking a fundamental value-driven view and focusing predominantly on European sub-investment grade loans and bonds, the Credit Value fund can also take opportunistic positions across the various asset classes – and the six-strong team operating under Germano place high emphasis on capital preservation, downside protection and hedging market risk in what is generally a fairly long-biased credit portfolio.
The Credit Value Fund has started strongly – up by almost 7% to the end of October after five consecutive months of increasingly strong positive returns – while the Global Credit Opportunities Fund is up by around 0.5% after its first four months of trading, having made 1% in October after giving back earlier gains in September’s unsettled market conditions.
Given the array of dislocations, inefficiencies, new regulations and structural changes across the credit markets – not just in the Eurozone, but globally – the Goldbridge partners are confident that the sector will present highly attractive multi-year opportunities for investors and managers.
But they are equally adamant that those opportunities can only be properly realised by ensuring that the right structures are used to target different types of investment styles and strategies – and by ensuring that managers and investors are fully aligned, both over the short and long term.
“What the 2008 crisis showed is that it is vital to have the right kinds of structures to target different kinds of opportunities, and that getting the asset/liability match right upfront is absolutely critical,” says Germano.
“In creating Goldbridge we have tried to take a step back and think about what happened. Living through that kind of crisis is a lesson that has reshaped our thinking about the asset management business – and we have worked really hard to create something different and meaningful.”
In areas like fund structures, capacity, remuneration and governance, she says, Goldbridge has been engaged in active discourse with investors to ensure that all parties are on the same page from the outset – and that clients understand, and support, the whole ethos and philosophy of what the firm is trying to do.
“We may be a young firm, but our collective experience is very extensive,” she says. “We have one of the longest-established sub-investment grade and investment grade credit teams in the business – and we think the multi-year opportunities in our asset class are enormous.
“But experience has shown that you need to have the right long-term incentive structure to generate the most consistent and sustainable results for investors and for all the partners – and we have taken great care to ensure that we set things up in the right way, right from the start.”