Ahab Answers Distressed Call With New Debt Hedge Fund

Jun 9 2008 | 7:31am ET

New York-based Ahab Capital Management is answering the call for relief in the distressed debt space with a new hedge fund. The $480 million firm next month is launching the Ahab Distressed Debt Fund with $25 million in initial assets.

Ahab’s distressed debt vehicle will focus on companies facing an operational turnaround or bankruptcy restructuring that offer attractive risk-adjusted returns, according to a fund fact sheet obtained by FINalternatives. The fund aims to return 15% net of fees annually and is offering full transparency.

The firm could not be reached for comments before press time.

The fund charges a 2% management fee and a 10% performance fee with no lock-ups.

Ahab joins a growing number of hedge funds looking to profit from the credit downturn. Pequot Capital Management is reportedly raising a third distressed fund and Switzerland’s Union Bancaire Privée this month is launching a pair of funds of $300 million hedge funds focused on distressed hedge fund and private equity managers.

“We think it is a good time to be looking at the strategy, but we're certainly not believers in that defaults are going to increase within the next few months or so,” said Schoaib Khan, portfolio manager, told FINalternatives. “In fact, we see large bankruptcies and distressed coming to market further down the road later on this year and next year.”

Even institutional investors recognize the opportunities to be had in the space and are gearing their allocations appropriately. The $6.3 billion San Bernardino County (Calif.) Employees’ Retirement Association, which has a 4% allocation to credit strategies, in April committed a total of $60 million to a pair of distressed-debt funds

Assets in distressed investment funds grew to a record $105 billion last year from $70 billion in 2006, according to Hedge Fund Research.

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