J.P. Morgan liquidating hedge fund focused on CLO warehouse financing
J.P. Morgan Asset Management is liquidating a $1 billion fund used to finance warehouse lines of credit for collateralized loan obligations and other alternative credit/leveraged vehicles.
A preson familiar with the decision confirmed to Asset Securitization Report that the Palm Lane Credit Opportunities Fund is being wound down. The decision was not related to performance, which has been positive since it was launched in 2011, this person said. The fund was headed by chief investment officer Fahad Roumani and enjoyed strong investor support.
The decision to wind the fund down and return proceeds to investors by the end of the year was previously reported by Bloomberg News.
Palm Lane had a cumulative return of over 50% since its founding, and had ceased charging management fees in May, according to an internal investor newsletter cited by Bloomberg. Over 40% of the funds were used by CLO managers as warehouse financing to purchase below investment grade loans in preparation for securitization.
According to a LinkedIn page for Palm Lane managing director and senior portfolio manager Michio Brunner, the J.P. Morgan Credit Asset Management business unit focused on “non-directional opportunities in the CLO, CDS, credit correlation, illiquids and leveraged loan markets.”
The newsletter also stated the decision to close the private fund comes after earlier plans to spin off the unit were called off under Roumani.
A J.P. Morgan Asset Management spokesperson declined comment.