Citadel Mortgage Vets Plan $250 Million Hedge Fund

Oct 23 2012 | 2:04pm ET

A group of Citadel Investment Group veterans will launch an asset-backed securities hedge fund early next year with about $250 million.

The foursome, led by Kevin Scherer, hope to have that money raised when they launch Continuum Investment Management in January, Bloomberg News reports. The new fund will invest in residential and commercial mortgage-backed securities and other structured-credit opportunities.

"We're seeing world financial institutions delever their balance sheets—that's attracted a significant amount of capital," Scherer told Bloomberg. "Anytime the government extracts themselves from a market, there are significant opportunities."

At New York-based Continuum, Scherer will be joined by Brian McDonald as senior portfolio manager, Jimmy Rizos as head of mortgage technology and Stephen Cameron as head of research and development. McDonald and Rizos held similar posts at Citadel, while Cameron was a quantitative mortgage strategist. Scherer managed the Single Investor Fund at Citadel, where he worked from 2008 until last year.

Prior to joining Citadel, Scherer co-founded and worked at mortgage-arbitrage hedge fund Midway Group.

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