Steamboat Springs Steamboat Springs-based investment fund manager Deer Park Road Corp.’s STS Partners Fund was ranked seventh among the best hedge funds this month by Barron's financial newspaper. And Deer Park President and Portfolio Manager Michael Craig-Scheckman says the timing was propitious.
The announcement that STS Partners ranks highly among global hedge funds comes just as Deer Park Road is preparing to introduce a new fund, Burgess Creek, on June 1 after closing STS to new investors in March.
“It couldn’t be better timing,” Craig-Scheckman said Tuesday. “It shows you can run a world-class business out of Steamboat.”
As of Jan. 1, Deer Park Road Corp.’s assets had surpassed $820 million.
Since 2008, STS has focused on acquiring deeply discounted mortgage- and asset-backed securities with strong cash flow.
“We look for what people are trying to get rid of,” Craig-Scheckman said. “We buy stuff with a lot of cash flow and yield. As a result, we have inventory earning a very hefty return.”
Deer Park Chief Operating Officer Brad Craig said STS was closed to new investors in order to preserve its ability to meet the expectations of existing investors. STS Partners has been outperforming the company’s goals, he added.
STS Partners earned its status on Barron's top 100 based on its three-year compounded rate of return of 28.38 percent.
The fact that Barron's thinks so highly of a hedge fund based in a small mountain town like Steamboat Springs is noteworthy by itself. Other members of the top 15 include Manhattan suburb Red Bank, N.J.; Singapore; London; Greenwich, Conn.; New York, of course; Copenhagen; Dubai; and another small city, Minnetonka, Minn., population about 50,000.
Craig-Scheckman said that when he counts himself, his company employs 15 people, 13 of them full time. Fourteen of them have professional roles with the company, and an even dozen already lived in Steamboat at the time they signed on, he said.
Other Deer Park executives include: Scott Burg, portfolio manager; Hao Li, associate portfolio manager; Steve Paoli, chief financial officer; Will Bashan, managing director; and Amy Charity, investor relations manager. Investors are from across Europe, Australia, Kuwait, Bangkok, Hong Kong, Brazil and the Caribbean, among other countries.
Craig said Craig-Scheckman spent 25 years commuting to a job in finance on Wall Street from Long Island. Ultimately, he realized he could move to Steamboat and do the same thing. The rural location might have been a challenge at first, but today, it’s a strength, Craig said.
“This geographic location not only creates a successful company, but we have a great life, which is just as important,” Craig said.
He confirmed what was reported in a 2012 article that appeared on www.risk.net: The investment team at Deer Park Road might review 200 to 400 bond offerings before scrutinizing 50 to 100 of them to decide whether to make an offer. Despite those numbers, Craig said, there is time in the day to leave the company’s office in Ski Time Square and go skiing or hiking. It helps that Deer Park has a proprietary model that allows them to estimate a value for the bonds they are considering acquiring and establish a bid range they won’t exceed.
Craig-Scheckman went as far as saying that excusing himself to go skiing can be a successful negotiating ploy to be used with bond traders. Nothing signals a lack of urgency like telling a harried trader in Manhattan that it’s a powder day in Steamboat.
“You tell them, ‘This is the best we can pay,’ and, ‘We’ll be back in a few hours after we’re done skiing.’”
It’s not unheard of to close a transaction over the phone from a chairlift. And that just might beat working from a high-rise on Avenue of the Americas in Manhattan.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com