With baseball season just around the corner, one hedge fund manager is enjoying quite the rookie year.
Charlotte, N.C.-based Maiden Capital’s first fund, the Maiden Capital Opportunities Fund, got off to a running start, returned 23.6% net of fees in its first quarter of operation. And it opened 2007 on a strong note, returning 2.6%, topping the major hedge fund indices, including those tracking the hot event-driven strategy.
“It’s a great environment for what I’m doing,” portfolio manager Steven Maiden says. In his first quarterly letter to investors, Maiden credited the sky-high returns to his concentrated long positions’ outperformance, no significant losing positions, strong short-term trades and limited short exposure.
The Opportunity Fund focuses on small-cap stocks in its event-driven portfolio. Maiden says he focuses on overly-complex, misunderstood and “negative event” situations. “Market participants are sometimes erratic and irrational and tend to overreact. If you can catch that at the right turn and understand the fundamentals and valuation of a company well, that can add to your understanding of a floor value quickly,” he says.
“I come at the world with an expected-return viewpoint, really trying to box my downside and understand it independent of the catalyst.”
The core of the portfolio is in five to 10 “high conviction” positions, with 5% to 10% weighting at cost. In addition, Maiden puts some of his assets into a number of short-term trades designed to cut volatility in the fund’s returns. “I’m hoping to hit singles and doubles with those sort of event-driven catalyst-type trades to help smooth out the returns from the lumpier, higher-conviction core names,” Maiden says. In total, he’ll have anywhere between 35 and 50 names in the fund at any one time.
The old cliché teaches that nothing sells like success, and that’s certainly borne out by Maiden’s experience. He spent four years at Chase Securities after graduating from Duke University. At Chase, he focused on high-yield corporate finance and served as a founding member of the firm’s European high-yield group in London. After earning his MBA at the University of Virginia, he joined Charlotte-based hedge fund Mangan & McColl Partners, where he served as an event-driven analyst for better than four years.
With an eye-popping 26.8% net return in his first four months, Maiden acknowledges that “the start has grabbed people’s attention. There are several marketers who are interested in helping to market the fund.”
He launched the Opportunity Fund on Oct. 1 with $1 million, mostly from family and friends, and, indeed, there’s already one fund of funds invested with Maiden, and another committed. Maiden says he’s now up to $3 million, and has about $2 million more in commitments. But, for the time being, he says he’s still trying to decide on how to accelerate his strategy’s growth.
The fund charges a 1.5% management fee and 20% performance fee. VantHedge Point is Maiden’s prime broker, and SS&C serves as administrator.