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    BlueMountain is closing its flagship fund as Stephen Siderow leaves

    Abstract:BlueMountain started 2019 running billions in different hedge funds. By the end of 2020, the firm will be almost entirely out of the hedge fund game.

      BlueMountain is winding down its 16-year-old flagship fund, the $2.5 billion BlueMountain Credit Alternatives fund, to focus on its CLO business for its new corporate owner, Assured Guaranty. BlueMountain co-founder Stephen Siderow will also leave the firm at the end of the year, the firm said in a statement. The manager, which just a year ago was running several different hedge fund strategies, has pulled back from the space in just ten months. Click here for more BI Prime stories. BlueMountain — which has been a major player in the hedge fund game for more than 15 years — is winding down its flagship BlueMountain Credit Alternatives fund. Affiliated Managers Group recently sold its majority stake in the struggling firm to bond insurer Assured Guaranty, which also purchased the remaining equity in the manager. BlueMountain closing the credit fund marks a huge retreat from the highly competitive hedge fund industry. The credit fund, which launched in 2003 and manages roughly $2.5 billion, was the centerpiece of a hedge fund portfolio that used to include a systematic long-short equity fund and a discretionary stock-picking fund that the manager also shuttered this year. With the $160 million sale to Assured Guaranty, BlueMountain is focusing its efforts on its CLO line, which already manages billions. “Consistent with the firm's investment strengths, BlueMountain plans to launch newstrategies aligned with the firm's focus on collateralized loan obligations (CLOs) and structured finance.Such strategies will include the areas of CLO equity tranches, as well as asset-backed securities focusedon private debt investments in specialty finance companies and assets,” the manager said in a statement. The flagship will be wound down completely by the fourth quarter of 2020. The statement said that the fund delivered 177% cumulative net returns since 2003, with an annualized return of 6.7% after fees. A source familiar with the situation told Business Insider that roughly 8% of the assets within the fund are from BlueMountain insiders — about $200 million. Co-founder Stephen Siderow, who launched the firm alongside investment head Andrew Feldstein, will also leave by the end of the year, the firm said in the statement. “This is the right time for me to consider new opportunities across my business and philanthropic interests. I'm delighted to see BlueMountain begin a new chapter as part of Assured Guaranty, and I'm confident in their vision for the business. I feel very fortunate to have had the opportunity to build BlueMountain with Andrew, whom I consider to be one of the great investors of our generation,” Siderow said in the statement.Press releases after BlueMountain's sale had noted that Siderow would be a president of BlueMountain, while Feldstein would become the CIO of Assured Guaranty's new asset management unit. See more: $21 billion hedge fund BlueMountain Capital has upped its bet on PG&E, the utility that's crashed 60% since the California wildfires. Here's why.BlueMountain, known for its credit investing prowess, struggled in the hedge fund game once it expanded beyond its core strategy. While Feldstein is widely respected for his bets against his former employer JPMorgan in its London Whale trade — which netted BlueMountain hundreds of millions in returns — the firm could not keep up with multi-strategy behemoths like Citadel, Millennium, and Point72, despite investing in talent and technology to support equity strategies. Affiliated Managers Group, the one-time majority investor in BlueMountain, had to write-off a $415 million expense earlier this year because of BlueMountain's struggles, though AMG executives said the firm was on the path to profitability after cutting the equity strategies to focus on its credit roots. But then the firm's head of fundamental credit, Omar Vaishnavi, was reported to be leaving the firm, despite recently representing the firm on-stage at a conference. The firm's expansion into CLOs made it an attractive buy for Assured. An investor presentation by Assured on BlueMountain after the acquisition was announced focused less on the firm's hedge funds and more on the CLO line that doubled to roughly $12 billion over the last five years. “Continue to issue multiple CLOs per year in both the US and Europe,” the presentation stated in a section titled “Go Forward Focus.” The Credit Alternatives fund has struggled to keep up with this year, losing money in a year the average hedge fund has returned nearly 7%. Records show the fund hasn't returned more than 6.1% in a year over the last five years. The manager plans to continue to run its $580 million Global Volatility hedge fund, a source close to the firm said.

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