Bracebridge Capital Thoughts?
Wondering if anyone can shed light on Bracebridge. They seem to be a strong player in the field (consistent 10%+ returns, 10bn+ AUM according to website, SEC filing says they're levered up to 70bn+), but they seem to intentionally fly under the radar. Saw them on Argentina back in 2016 and now on Mallinckrodt and also that they do rates/structured products trading. Any info on these guys, and whether a seat would be attractive from an interesting work/culture/comp/prestige standpoint?
Hey Investment Analyst in HF - RelVal, I think you deserve a response...heck, everyone does. We're listening, sorry about the delay ...my best guess at places on WSO that could help:
More suggestions...
I hope those threads give you a bit more insight.
bump
Super legit firm in rates/credit. Nancy is one of the most accomplished managers of all time. Usually hire Harvard/MIT kids out of undergrad.
Is it an SM?
Under the radar for a reason and they manage endowments from Harvard, Yale, etc with only ivy league kids / MIT out of undergrad. Heard you get carry from your junior years (2nd year analyst?) if you started off out of undergrad – great place to be imo.
Damn carry in Y2 is crazy. Do you know why they're intentionally under the radar? Would've thought that this prevents them from getting the best talent but then again their IPs all seem incredibly smart
Interesting, they keep popping up now and then around wso. Anyone got numbers for comp?
Smart people - love to talk about their intimate relationship with Yale endowment and such…
bump, very interested.
Any comp numbers?
all I know is that comp is below BW investment associate, know someone who had offers from both. I’d bet anywhere from 125-200.
Former LP in the fund. Their returns are nowhere near 10% nor have they been for ages (maybe since inception but who has actually been an LP for 30 years?). They run like $15bn or so (give or take a few bn - not a current LP so may be out of date) before leverage and yes its an E&F favorite and lord knows why because they just run a large illiquid carry book with structured credit and then a bunch of stuff around it (that they can lever more) like corprates, rates, EM etc. I can tell you for a fact they were down near 10% in March 2020 (which means they were down even more intramonth) but they happened to be able to raise another $1bn for April 2020. FWIW the S&P was down like 12.5% that month... So the fund's downside capture was huge.
So the returns aren't really good and they don't protect to the downside in general... so what's the point of such a hedge fund in your portfolio? Either find something to lower vol or just be long equities and more liquid.
I'm saying this as a former HF PM and as a former and current LP allocator.
That said, shop has a lot of money, can pay and has a good name and maybe a good career stepping stone. Can't say for working there..
Good Luck
If they’re levered 5-6x as their 13F implies and they are only down -10% in a super volatile month like Mar 2020, is that not pretty good?
Also, when did you exit as an LP? Curious to know if performance has improved since rates started shooting up.
Ok let's think about this very simply. You are the CIO of an LP. You (or your HF person/team) chooses Bracebridge (and it's pitched as such) to be a "diversifier" or "lower vol" or "more steady" or "less correlated" source of returns. It's why you, as a CIO of an LP, decide that your institution will pay them lots of money. If this works, you are happy, your board is happy and you get to keep your cushy job. This is good.
Now go back to March 2020. You are the CIO of some Endowment/Foundation/Pension/Family Office. Your LO equities book (collection of managers/ETF/Index Funds) has been crushed (but its liquid). You knew that this was a risk in these funds. That's equities. Your low cost fixed income book did well because rates were cut to zero. Your hedge fund book did terribly, mirroring or almost mirroring equities. This is the complicated portfolio of hedge funds with all kinds of weird strategies, terms, instruments and supposedly managed by the smartest, fastest, most nimble and thoughtful people. You hired some expensive person (or people) to pick said hedge funds because they understand hedge funds, are well networked and can get you into the best ones run by the best people.
Bracebridge was one of those funds. But in March 2020, its downside capture was 80% of the S&P. Had they been making 80% of the upside of the S&P before then? I can tell you the answer is no friggin' way. It was more like 50%-ish. That's what we call negative convexity and kind of the opposite of what a hedge fund is supposed to be. Did Bracebridge do the job it was pitched? No.
As a CIO, you could literally do passive 60/40 with Blackrock or whoever for like 10-15 bps with no DD/resource costs, quarterly calls, legal fees, documents etc and do better on both upside and downside compared to Bracebridge and your "diversified" hedge fund book.
The above is not something I made up out of thin air. It's something I literally witnessed as I saw my institution's PnL. Maybe we (my long-departed predecessors) just picked bad hedge funds (probably). But they were all very blue chip ones, many of which have been cited on this board.
The example above is literally one data point to argue that the HF space is overcrowded and lacking in value add to anyone but the managers themselves (or their wallets). The fault is on LPs for putting up with it. But I could point at other data points (last year when rates and equities were down and lots of "RV" funds were, surprise, long rates and equities).
Cynically, I guess the above is what keeps me in a high paying and not very stressful job (currently). But the world and markets would be a much better place if like 50%-70% of hedge funds in the market just folded. This is not saying people at hedge funds are dumb or anything, but that there is little to no edge and that it's all really a game of marketing/timing.
Once again my two cents as a former PM and current allocator.
FWIW - I changed jobs. My previous institution is still with Bracebridge and its a size position in the book, much to my chagrin (I tried to argue to redeem and it was a non-starter)
Very insightful comment, thanks!!
I am familiar with the firm. Some of the points Jamoldo has made are true; yes, the 10% annualized is since inception, they have had a few quieter years (last 5 years ~6%) and Mar 2020 wasn't a great month. That said I wouldn't say that the fund has negative convexity wrt the stock market, for instance despite the big stock market losses last year the fund held in, and looking at all previous episodes of equity contraction, the fund shows a minimal beta. I would agree with Jamoldo though that their returns suggest some tail risks not being accounted for. Hear they are having a very good year so far. Higher rates and vol offer a more attractive backdrop for their strategy.
been following the fund for a while now and am curious - whats the ballpark range for performance this year? Heard from
a former colleague that they market themselves as having equity-like returns, wondering if that is the case
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