Dallas-based KeyPoint Capital Management has launched its maiden hedge fund, focusing on the downtrodden real estate market. The Keypoint Real Estate Opportunity Hedge Fund debuted in January, losing 0.5% in its first month of trading.
Keypoint is the brainchild of Rod Hinze, who previously worked as an investment banker at Bear Stearns’ and in Goldman Sachs’ real estate private equity group. Prior to founding his own firm, Hinze managed the real estate portfolio for another Dallas-based hedge fund, Western Reserve Capital Management.
Hinze, who specializes in long/short strategies utilizing publicly-traded real estate concerns, including real estate investment trusts, is optimistic about scoring big within the currently sorry sector.
“The Morgan Stanley REIT Index was down 18% in January so there are opportunities both long and short,” says Hinze. “On the sort side, you have a lot of walking-dead names and you also have the highest quality, well-funded, low levered names that are trading at 50% of net asset value.”
He adds that the new administration’s stimulus package will be helpful to the real estate market because it will open up the credit market, which real estate is heavily dependent on “at a reasonable rate.”
Hinze’s effort comes at a time when most investors are pulling back or out of the hedge fund space entirely. He says this is the most difficult fundraising market he’s ever seen on the institutional side but is more hopeful about individual investors.
“There seems to be very little interest on the institutional side but eight out of 10 individual investors have either given me money or have expressed interest in investing in my fund,” he says.
He’s also looking to launch an offshore version of the fund later this year or early next year, and may shop a separate fund for private equity deals if there is interest.
Real Estate Opportunity charges a 2% management fee and 20% for Class A shares, which have a one-year lockup, and 17.5% for Class B shares, which have a three-year lockup. The fund’s minimum investment requirement is $1 million.
The firm’s other partners include Glen Solomon, a real estate investor, and Carl Esrey, founder of BMC Capital, a commercial real estate lender.