By Amy Or
NEW YORK--Hutchin Hill Capital, a New York-based hedge fund that
manages $1.2 billion, has launched a new fund that concentrates on
long/short credit trading, a successful strategy for the firm as
demonstrated by its betting against J.P. Morgan Chase & Co.'s
(JPM) "London Whale" with credit default swap trades.
The new fund, called Hutchin Hill Liquid Credit Strategy and
launched this month, is a "carve-out" from its main fund, Hutchin
Hill Capital Master Fund, a person familiar with the matter said
Wednesday.
The new fund has already secured $100 million in anchor
investment from an unidentified U.K. pension system, and is only
expected to raise a "limited amount of capital" in the next few
months, the person said.
Hedge fund managers often scale their fund's size in relation to
the level of market opportunities and a firm's capabilities. Some
funds also choose to remain relatively small, or gather "limited"
amounts, to be nimble in trading.
Hutchin Hill's liquid credit strategy posted a 0.10% gain last
month and a 2.52% increase through June 29, according to an
investor letter on fund performance sent earlier this month.
Hutchin Hill declined to elaborate on the performance stated in the
letter
Despite the new credit-oriented single-strategy fund, the firm
founded by former SAC managing director Neil Chriss will maintain
credit-market exposure in its main fund. The other six strategies
in the main fund are: long/short equities, event-driven, quant,
macro, managed futures and opportunistic investments.
According to another investor letter, dated July 4, reviewing
the main fund's performance, the fund believes the current
environment possesses credit-related opportunities that are more
attractive than equities, including some opportunities related to
J.P. Morgan unwinding its positions.
The ongoing European sovereign debt crisis also provided much
fodder for potentially profitable trading.
"Given the continued uncertainty around the Spanish banking
sector bailout and (Italian Prime Minister Mario) Monti's
government in Italy, we are looking to take advantage of panicked
short covering into the summit (of European leaders last month) by
selectively entering new shorts," it said.
While the fund is prepared for further market correction, it is
also mindful of possible sudden yet sharp rallies in the credit
market.
"The weak European banking sector has dampened both the emerging
markets and U.S. economy. We believe it is important to take into
account various easings and liquidity injections that are underway
throughout the world that could trigger rallies in a worsening data
environment," it said.
Write to Amy Or at amy.or@dowjones.com