At a time when a number of investment managers are selling loan portfolios to recoup whatever they can, BlueMountain Capital Management, a privately owned investment management firm, has launched the BlueMountain Corporate Loan Fund, a fund that will focus on distressed U.S. leveraged loans.

The fund will be the first in a series of new vehicles that BlueMountain plans to launch this year that will focus on the dislocation in capital market.

These funds will be designed to “encompass a variety of long-only and relative-value strategies, including bond basis and capital structure arbitrage, with underlying instruments spanning corporate loans, bonds, and ABS,” the company said in a release.

“In today’s extremely stressed market conditions, deleveraging and redemptions have resulted in higher quality assets trading below fundamental value due to indiscriminate liquidations, creating outstanding opportunities in asset classes such as corporate loans and bonds,” Stephen Siderow, BlueMountain’s president, said in the release. “While the market dislocation may not be resolved soon, with patient capital and careful credit selection, these asset classes will generate superior returns over the next three to five years.”

The BlueMountain fund will not use borrowed money to boost returns, and the firm will charge a performance fee based on “realized” cash distributions, rather than mark-to-market gains.

BlueMountain will only be paid after all principal has been returned to investors, and the firm can unwind the fund when the dislocation in the market ends. Investors have the option of leaving the fund anytime after a two-year initial commitment.

Additionally, the fund “will provide full instrument level transparency” to investors in monthly reports, the company said.

The fund was started with money from London-based clients, including solvency manager Cardano and BlueMountain employees.

A spokesman said the firm has raised more than $100 million for the new fund, but declined to be more specific.

BlueMountain oversees approximately $4.6 billion. It runs three CLOs in addition to a number of funds, including the Defensive Credit Fund, a separately managed account with approximately $800 million under management.

BlueMountain’s credit team is led by Derek Smith, the former head of U.S. and European investment-grade and high yield trading at Deutsche Bank, and before that head of U.S. investment-grade credit trading at Goldman Sachs.


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