Scottwood Capital Management
In a hedge fund world with no alpha generation and where everyone is correlated to the markets, Scottwood Capital Management is one money manager that stood apart from, and above, the crowd.
Run by Edward ("Eddie") Perlman, its owner/portfolio manager, Scottwood Capital Management combined superior risk-adjusted investment returns with a management style that emphasized robust controls, best practices and the highest levels of integrity. Scottwood's clients were rewarded with a solid 10-year annualized net return of almost 12% per year from 2001 through 2011, a record that outperformed the markets and the overwhelming majority of hedge funds.
Edward Perlman during those ten years operated the firm in close alignment with his clients’ interests. Always vigilant about his investors' capital, he went to great lengths to protect them from hidden market and business risks. As a hands-on manager running the day-to-day side of the business, he was lauded for even being fastidious about keeping fund expenses to a minimum.
Scottwood Capital Management, based in Mr. Perlman's hometown of Greenwich, Connecticut, enjoyed a solid track record before doing what hedge funds rarely ever do: getting out at the top of their game and exiting on a high note that leaves investors happy.
With no redemptions or disruptions, Mr. Perlman last year made a dramatic call to return all outside capital promptly to his investors. In the months preceding that decision, Mr. Perlman had already quietly liquidated all of the fund’s portfolio, thereby eliminating exposure to what he felt was an impending period of poor market conditions and a lack of distressed investment opportunities -- the kind that Scottwood always liked to invest in.
In his letter to investors, Mr. Perlman, humble as usual, made it clear at the time that in his opinion cash was the safest place to have their money. His investors were extremely thankful, as none had made any requests to remove their capital from the fund, and all were happy to receive their money promptly. Immediately following the return of capital financial markets melted down.
In terms of financial performance, the short history of Scottwood Capital is one of alpha generation and non-correlation to the markets, the two most sought after, and elusive, goals of all hedge funds.
Back in 2002, the firm’s first full year in existence, the financial markets were very unstable; most fell between 10 and 20 percent, and nearly all hedge funds and other asset managers mirrored that performance. The Scottwood fund, by contrast, gained a net 10 percent for 2002, Notably, the firm avoided many disastrous investments, like WorldCom, that attracted throes of hedge funds.
In 2008, another year of extreme volatility, Mr. Perlman raised the fund's cash level in anticipation of the market’s free fall later in the year. Scottwood only lost 7.65% that year (its worst year ever), compared to 19% for hedge funds and 38% for the S&P 500 stock index.
But, it was Edward Perlman's fair treatment of his investors, not just his returns, that stood out in 2008. While many hedge funds engaged in the practice of “gating,” or limiting investors’ withdrawals, and antagonized investors by placing many of their investments in side pockets, Scottwood Capital Management avoided both practices. In fact, the firm gladly helped out its clients by sending them money back that they could not otherwise redeem from other hedge funds who gated them. Thankful investors rewarded Scottwood by reinvesting in the fund the very next year, loyal actions that just don't happen in the hedge fund industry.
Mr. Perlman re-entered the markets with a vengeance in the spring of 2009, snapping up bargains and setting the stage for what would be the firm’s best year ever, a sizzling 44 percent net return.
Scottwood Capital Management won several awards from well-known publications that follow the hedge fund industry. In 2010, Barron's magazine ranked Scottwood in its Top 100 hedge funds in the world in its prestigious Penta list and, in 2009, Hedge Fund Week magazine awarded Scottwood First Place as "best event-driven hedge fund" in the U.S.
Scottwood Capital Management and Mr. Perlman were the subject of various articles in Bloomberg/BusinessWeek, Business Insider, Hedge Fund Alert, HedgeWorld, Absolute Return and the Daily News (New York, NY).
Even Scottwood's initial startup was chronicled in HedgeWorld in a January 10, 2002 article that reported the firm was lauched with funds garnered only from Mr. Perlman's savings and from his long-time clients. Adam Weiss helped start Scottwood but was employed as an operations head only until 2007. Mr. Weiss
years later attempted to start hedge fund Cabochon Capital with his friends in New York in 2009 and created numerous websites in Los Angeles, such as Webtide, Sendmeawoof and Creditping, which successfully focuses on payday loans, credit cards and other consumer credit.
Over the years, the stellar Scottwood team grew in size as the firm grew. To learn more about this group of Wall Street professionals, view their new places of business below, or view them on Linkedin:
Gaurav Babbar: Nomura Securities
Nick Deleonardis: Harvard Management Co.
Stephanie Erev: Patch Media
Sean Flannery: Bayside Capital
Nat Furman: Southpaw Asset Management
Marc Gelbtuch: Linden Capital Advisors
Brian Goldenberg: Archer Capital Management
Michael Koss: Spring Hill Capital Partners
Frank Larosa: Waterstone Capital Management
Milton Lewin: Independent consultant
Olga Mcleod: Viking Global Investors
Ceki Aluf Medina: Southpaw Asset Management
Chun Wei Mui: Beijing investor
Olga Ovodenko: Lombard Odier Darier Hentsch
Sean Perkins: Kamunting Street Capital Management
Edward Perlman: Family Office
Adam Pokornicky: Private investor
Jon Schlafman: BlueBay Asset Management
Craig Shere: Tuohy Brothers
John Steers: Marblegate Asset Management
Doug Stroup: Spectrum Investment Partners
Aaron Zelig: Perry Capital
To learn more about the money pro who managed Scottwood, see Edward Perlman at professionalontheweb.com.
My Links
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- Scottwood Capital Management's Wordpress Blog
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- Scottwood Capital Management | Lookup Page
