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Muni Traders Plan Relative Value Fund

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NEW YORK (–BTP Capital is tackling a generally overlooked segment of the fixed-income market, municipal bonds, with a new hedge fund slated for a Dec. 1 launch.

The firm was founded in August by Jim Wise and Chris Dillon, former traders on J.P. Morgan’s proprietary trading municipal bond desk. The new fund, also under the BTP Capital name, is expected to begin trading with US$50 million, according to company officials.

The fund hopes to take advantage of what is a large market–BTP tags it at 60% the size of the U.S. Treasury market–but for structural reasons is inefficient. The inefficiencies exist because both municipal issuers and large investors are restricted in how they can invest and trade, according to BTP.

Mr. Dillon said that the fund would generate some tax-free interest income to U.S.-domiciled investors. But the focus of returns will come from the manager’s trading strategies, which center on relative value trades arising from mispricings within the tax-exempt market and between the tax-exempt and taxable markets. The fund also will use strategies entailing forward bond trades, bond structure trades, ratio curve trades and money markets.

BTP is represented by Blue Sand Capital LLC, Haiku, Hawaii.


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