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Andrew Redleaf's Whitebox Advisors is out to show pension funds that quantitative investing is not as productive as it claims to be.
By Irwin Speizer
Andrew Redleaf: Wants to prove most academic finance wrong (Photographs by Darin Back)When the mortgage securities craze was in full throttle in 2007, Andrew Redleaf of Minneapolis-based Whitebox Advisors was among the handful of hedge fund managers who shorted the securities -- and cleaned up when they tanked. In the economic collapse of 2008, as other managers fretted about possible backlash from suspending redemptions, Redleaf became one of the first to block redemptions, as a means of protecting his portfolios from fire-sale liquidations. He once took his hedge funds, which tend to specialize in arbitrage and market-neutral plays, on a major detour, buying half of a regional airline that he later sold at a loss. Lately, he has promoted the investment opportunities in natural gas, where a production glut has prompted a mass retreat by investors and a plunge in prices.
A contrarian bent that seeks anomalies and arbitrage opportunities across the capital markets has been Redleaf's hallmark since Whitebox's inception more than a decade ago, showing up in everything from risk management to the casual office dress code. It is a style that, despite a few setbacks, has proven resilient and profitable. Whitebox executives declined to discuss performance numbers or other financial statistics of the firm's funds. But according to other sources, the Whitebox Concentrated Convertible Arbitrage Fund, the oldest fund in Redleaf's stable, posted net annualized returns of 19.4 percent from its 2001 inception through the end of June. The Whitebox Multi-Strategy Fund had net annualized returns of 14.8 percent from inception in 2002 through the end of June.
"Andy is a moneymaker," says Tom Williams, chief investment officer of Pine Grove Asset Management, a longtime Whitebox investor based in Summit, New Jersey. "And he is good at recruiting other moneymakers."
Still, Redleaf, 55, has had trouble growing assets recently. Although he won't say how big he would like to be, he clearly believes his firm can manage far more than its current $2.3 billion. This total includes four strategies spread across five hedge funds and a new mutual fund run by the same investment managers who...