Bloomberg News

Weinstein’s Saba Said to Hire JPMorgan Trader for CMBS Swaps

September 01, 2011

(Updates with commercial mortgage bond spreads in fifth paragraph.)

Sept. 1 (Bloomberg) -- Saba Capital Management LP, the hedge fund started by former Deutsche Bank AG credit trader Boaz Weinstein, hired Toby Maitland Hudson from JPMorgan Chase & Co. as the firm’s assets reach $4.1 billion, according to people familiar with the hire.

Maitland Hudson, who started at Saba in New York last month, ran JPMorgan’s proprietary trading of derivatives tied to commercial-mortgage bonds and will focus on relative value trades, according to the people, who declined to be identified because it hasn’t been publicly announced. Maitland Hudson joined JPMorgan in June 2008 from Bear Stearns Cos. after the bank was forced to sell itself amid a funding squeeze, according to records from the Financial Industry Regulatory Authority.

Saba is bolstering its trading in the market for debt and derivatives tied to commercial-mortgages as concern that economic growth is slowing spur price swings on the bonds, which are linked to properties from skyscrapers to mobile home parks. Prices on a Markit Group Ltd. CMBX index tied to junior AAA commercial-mortgage backed securities sold in 2007, which fall as default risk rises, have plunged more than 25 percent to 55 since the beginning of July.

Maitland Hudson referred questions to Jonathan Gasthalter, a spokesman for Saba, who declined to comment.

Debt Crises

The $600 billion commercial-mortgage bond market has been battered as Wall Street banks cut their inventories after investors fled risky assets amid debt crises in Europe and the U.S. The safest class of commercial-mortgage bonds is paying 291 basis points, or 2.91 percentage points, more than Treasuries, according to a Barclays Plc index. That compares with a spread of 209 basis points on July 1, and a low of 178 basis points on April 26.

Wall Street traders are being lured to hedge funds as the Dodd-Frank financial overhaul legislation cracks down on units that focus on bets made with investment banks’ own money. Saba is a so-called long/short credit fund that avoids large bets on the direction of the economy and instead seeks to profit from dislocations in prices between derivatives, bonds and loans. Weinstein, former co-head of global credit trading at Deutsche Bank in New York, started Saba in 2009.

The turmoil in capital markets comes amid signs that real estate values are recovering and defaults may have peaked. U.S. commercial property prices rose for the second month in a row in June, and are now 45 percent below the peak in October 2007, Moody’s Investors Service said in an Aug. 22 report. Late payments on commercial mortgages bundled and sold as bonds fell to 9.4 percent in August, compared with a record 9.85 percent in April, Royal Bank of Scotland Group Plc strategists Brian Lancaster, Richard Hill and Joseph Ruszkowski said in a report today.

--Editors: Pierre Paulden, John Parry

To contact the reporters on this story: Sarah Mulholland in New York at smulholland3@bloomberg.net; Shannon D. Harrington in New York at sharrington6@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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