Minnesota’s Waterstone Launches Second Distressed Fund

Minnesota-based credit hedge fund manager Waterstone Capital Management is launching a second fund.

The Waterstone Distressed Opportunities Master Fund will launch on April 2 and be run by the firm’s chief investment officer and founder, Shawn Bergerson and portfolio manager Kevin Cavanaugh. The fund will employ the same distressed debt strategy as the firm’s flagship Waterstone Market Neutral Master Fund.

Cavanaugh, who joined Waterstone in 2009, has 12 years of investing experience from Greenwich Capital and JP Morgan. Bergerson has 24 years of credit experience and a 12-year public track record annualizing over 14%. Bergerson’s co-founder and Waterstone chief operating officer, Martin Kalishfirm, has 20 years of experience in the financial industry from Bear Stearns, Appaloosa and Deephaven Capital Management.

The fund will be directionally long in performing markets, directionally short in underperforming markets and balanced in uncertain markets. The fund will incorporate more single-name shorts than most distressed funds and the use of leverage will be moderate. The fund will generally be fully invested and underlying investments will be more liquid than those of the average distressed debt fund.

The investment team includes two dedicated distressed analysts from Stark and Quattro while the investment team comprises six sector specialists, one quantitative risk analyst and two traders with an average of 15 years’ experience.

The fund will have a one-year soft lock, quarterly with 90 days' notice.

Waterstone Capital Management, founded in January 2003, has a 13-member investment team and manages $1.7 billion.