Paul Ferrarese to Head Business Development at Whitehaven Asset Management
The head of municipal-bond institutional sales at Goldman Sachs & Co. is joining a new hedge fund manager, seeking to take advantage of opportunities in a market that has been rattled by Detroit’s record-setting bankruptcy and fiscal problems in Puerto Rico.
Paul Ferrarese is joining Whitehaven Asset Management LP, where he will serve as head of business development and be charged with finding new investors and managing existing ones. Mr. Ferrarese will also help Scott Richman, who founded the firm in 2013, with investment decisions.
Earlier this year, Whitehaven launched the Whitehaven Credit Opportunities Fund, joining the small but growing ranks of hedge funds that focus on the $3.7 trillion municipal-bond market. The fund has $31 million in assets and another $4 million in commitments, Mr. Richman said in an interview.
Mom-and-pop investors attracted to the perceived safety and tax benefits of municipal bonds continue to dominate the market. But Mr. Richman said a slew of new and at-times more complicated investments, and the fact that many mutual funds focus on bonds from a single state, offer openings for hedge funds with a more flexible strategy.
For example, there are more municipal bonds where the interest is taxable, municipal bonds backed by corporations and municipal bonds backed by tobacco sales than there were about 10 years ago. Highly rated bond insurers that guaranteed municipal bonds saw their ratings cut in the aftermath of the financial crisis, making it more important for investors to understand the financial health of the municipalities issuing the debt.
“Post-2008, with the decline of bond insurance, and the increased headlines in the municipal space, there is a significant opportunity for a hedge fund with municipal credit expertise to capitalize on the inefficiencies in the market,” Mr. Richman, 31 years old, said.
Mr. Ferrarese, 46, was Mr. Richman’s salesman at Goldman, a unit of Goldman Sachs Group Inc., while Mr. Richman was head of municipals at hedge-fund-manager Gracie Asset Management. Mr. Ferrarese previously worked at Merrill Lynch and Citigroup.
Joining Whitehaven is “really appealing after 21 years working for three really large institutions,” said Mr. Ferrarese, who will start on March 24. “There’s definitely elements of entrepreneurism there but nowhere near the degree of trying to launch your own investment product.”
Detroit, which filed for bankruptcy after years of economic decline and population exodus, recently submitted a reorganization plan with steep cuts for existing bondholders. Puerto Rico is seeking to complete a bond sale that could top $3 billion, and market participants expect many of the buyers to be hedge funds. Mr. Richman declined to comment on whether his fund would be one of them.
By MIKE CHERNEY
Feb. 26, 2014 7:00 a.m. ET
Write to Mike Cherney at mike.cherney@wsj.com