March 15, 2017 / 1:59 PM / in 4 months

Former Perry Capital CIO Russekoff launches Smith Cove Capital

BOSTON, March 15 (Reuters) - David Russekoff, who engineered some of hedge fund Perry Capital's most profitable trades, has launched his own firm and expects to take in outside money in the coming months, two people familiar with his plan said.

Smith Cove Capital began trading with less than $100 million of partner capital earlier this month, making concentrated bets on distressed securities, buying both equity and debt, the people said. The fund is eyeing investments in the energy sector, sovereign debt and European telecommunications, financial and media companies, the people added.

During 13 years at Perry Capital, Russekoff helped build a position against the overheated housing market in 2006 to 2007 which earned the firm some $2 billion. In 2010 he worked on how to play the housing market recovery through bets on mortgage companies Fannie Mae and Freddie Mac.

He was the company's chief investment officer when he left the firm in 2015 with plans to eventually start his own fund.

At its peak Perry Capital invested $15 billion and took on Greece and Argentina over their defaulted bonds. Last year, Perry closed after having returned an average 10 percent a year over its 28-year life.

"Dave has shown an ability to manage risk properly while also having the ability to take big risks when necessary," said Kyle Bass, who runs hedge fund Hayman Capital and has known Russekoff for years. "He has the ability to go both long and short."

At Smith Cove, headquartered in Greenwich but named after an anchorage area in Long Island Sound, Russekoff reunites with former colleague, Bob Carroll, who is now his head trader. Roger Schmitz, who used to work at Monarch Alternative Capital, and Victor Consoli, who previously worked with Perella Weinberg Partners, round out the investment team.

As Russekoff sets out, raising money for hedge funds has become increasingly difficult at a time many pensions are paring back allocations amid concerns over high fees and low returns.

He will be launching at the same time a trio of prominent spin outs including Francis Cueto's Asturias Capital, Ben Melkman's Light Sky Macro and Brandon Haley's Holocene Advisors are also raising money.

Mark Doherty, managing principal at consultant PivotalPath, said Russekoff may have some time to build up a track record with his new team. "He has working capital and has been able to attract senior talent which gives him a better chance of success." (Reporting by Svea Herbst-Bayliss; Editing by Frances Kerry)

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