Wachovia Vets Launch Volatility Arbitrage Hedge fund

May 16 2007 | 9:54am ET

Charlotte, N.C., otherwise known as the hub of stock car racing, is now home to a new hedge fund. Charlotte Global Advisors this month launched Tryon Street Partners, a volatility arbitrage fund.

Scott Ladner and David Burelli, formerly with Wachovia as a trader and marketer, respectively, founded the firm in September 2006.

“We thought the market was ripe for a volatility arb fund and if you check the universe of hedge funds there are not that a great deal of volatility arb fund managers out there,” said  Burrelli.

The new vehicle, which was launched with $1 million, employs two strategies: a pairs trading strategy where it looks for mispricings between options on the same underlying names or names within the same industry; and a dispersion trading strategy where it looks for anomalies on option pricings between options on the names that make up an index and options on the actual index.

The Wachovia alumni are marketing the fund to friends and family, and are in talks with a seeder to ramp up its assets “significantly,” according to Burelli, who declined to comment further on the pending deal.

In general, Burelli said the firm’s fundraising efforts have been good but investors have expressed concerns over the fund’s lack of a track record and the fact that it is based in Charlotte, which is not exactly known for having a robust hedge fund community.

“We knew going in that it was going to be more difficult acquiring investments if we were here [in North Carolina] trying to acquire investors up in New York, but this was something we wanted to do,” said Burelli, who wanted to remain in Charlotte because of his family.

The fund charges fees of 2% for management and 20% for performance, with a $500,000 minimum investment requirement.


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