Only about 25 hedge funds
engage in municipal bond structural arbitrage at the moment, according to Bryan
Williams, a managing principal with fund of funds provider Rockwater Hedge.
Indeed, he is loath to share his contacts within this exclusive and
secretive market. "We’re talking about a $2.2 trillion [hedge fund] market,
and there are only 25 funds out there [that do these trades] compared with 8,000
funds in the broader marketplace. Part of the value Rockwater brings is that
we found the funds, so we don’t like to talk about who they are or who we have
in our portfolio," he says.
 With so much interest in the strategy, mainstream managers
are beginning to consider getting in on the action.
Steve Winterstein, managing director (and an experienced
trader) at Philadelphia-based PNC Municipal Investment Group, says he is very
much aware of the gathering interest around the trade, and adds that although,
to date, none of his investors has asked him to copy it, he expects this will
happen. "We haven’t had anyone come to us and ask us for that, but I would
suspect that as these programs become more prevalent in the marketplace, we’ll
have to address that issue—if and when it comes to us," he says. "We’re always
looking at fresh ideas, so take that as you may."
 Back to Main Article: Muni-ficent Arbitrage
|
