Solus Alternative Asset Management LP raised $1.1 billion for two funds that invest in bankruptcy claims and are overseen by a team including Scott Martin and C.J. Lanktree, former co-heads of distressed products at Deutsche Bank AG. (DBK)
Solus Recovery Fund I and II gathered the money within the last 12 months, the firm said in a letter to clients dated March 5, a copy of which was obtained by Bloomberg News. Martin and Lanktree run the funds, which are closed to new investments, with Christopher Pucillo, the firm’s president and chief investment officer, to whom they report.
Recovery I rose 16 percent in the 12 months since it opened last March and Recovery II gained 2.6 percent in the three months since its inception in December, according to the letter. The Solus Recovery funds have traded bankruptcy claims in cases including MF Global Holdings Ltd. (MFGLQ:US), Bernard L. Madoff Investment Securities Inc. and Lehman Brothers Holdings Inc., according to a person with knowledge of the matter, who asked not to be identified because the information isn’t public.
“We remain enthusiastic about investment opportunities in late-stage bankruptcy claims that we believe can deliver compelling risk-adjusted returns,” New York-based Solus said in the letter, which was signed by Wight Martindale, partner and director of business development.
Bankruptcy claims can be bought from original creditors and traded in private transactions whose terms are rarely disclosed.
Mary Beth Grover, a spokeswoman for Solus at Abernathy MacGregor Group, declined to comment on the letter.
Hedge-fund assets grew 2.8 percent to a record $2.25 trillion in the fourth quarter, according to Chicago-based Hedge Fund Research Inc. Investors deposited $3.4 billion in the period and $34.4 billion in 2012, the firm said in January.
Solus, which was founded in 2007 when the hedge-fund strategies group of Stanfield Capital Partners LLC spun out, specializes in event- and credit-related strategies. Event- driven funds seek to profit from events such as mergers. Credit managers may bet that the prices of bonds will rise or fall, or try to take advantage of pricing inefficiencies between fixed- income securities.
The firm’s flagship fund, Sola, which has a “significant allocation to the liquidation strategy” and invests in other distressed and special situations opportunities, rose 12 percent in 2012 and 6.3 percent this year through February, Solus said in the letter. The fund, also now co-managed by Pucillo, Martin and Lanktree, has returned an annualized 22 percent since its 2002 opening, according to the firm. Distressed and special- situations managers invest in the equity or debt of financially stressed companies.
Martin and Lanktree joined Solus in March 2012 as portfolio managers. Martin came to Deutsche Bank as a distressed- investment analyst in 1995 and later became a trader. Lanktree began his career at Salomon Smith Barney Holdings Inc. in 2001 as an investment-banking analyst in telecommunications and media. He was hired by Deutsche Bank in 2003 as a distressed- investment analyst before becoming a trader. The two were named co-heads of the firm’s distressed-products group in 2009.
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