BlueMountain's new owner just revealed what the future holds for the struggling hedge fund and its co-founder, and it's all part of a turnaround plan

Thomson Reuters

Andrew Feldstein, CEO and CIO of BlueMountain Capital Management, sits during the Harbor Investment Conference in New York.

• An investor presentation from Assured Guaranty outlines the focus for Andrew Feldstein and his BlueMountain team at their new owner.
• BlueMountain will have a bigger focus on collateralized loan obligations, and is expected to issue multiple CLOs a year in Europe and the US. Assured Guaranty will also provide capital for new hedge fund strategies to be launched.
• While Feldstein received $22.5 million in Assured shares, he is also going to invest up to $150 million in BlueMountain's funds and CLOs over the next three years.
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A day after Assured Guaranty said it would buy $19 billion hedge fund and CLO manager BlueMountain, it laid out what the future holds for the recently struggling firm and its co-founder and chief executive, Andrew Feldstein.

There were "many companies" that were interested in acquiring or partnering with BlueMountain, Feldstein said on an earnings call for the firm's new owner on Thursday. That's even after the BlueMountain turned in an industry-lagging performance for the first half of 2019 and axed a pair of strategies that were not profitable.

And for $91 million, Assured Guaranty was the one that ended up with Feldstein's company, buying out the partners of the firm and majority stakeholder Affiliated Managers Group. Now, an investor presentation shows just how the insurer is planning to put its new purchase to work.

CLOs, or collateralized loan obligations, already make up $12 billion of BlueMountain's $19 billion - and Feldstein expects to add $2 billion more in CLOs by next year - but Assured Guaranty's presentation makes it clear that it sees this unit as a key growth engine.

See more: BlueMountain's flagship fund is losing money so far this year even as the rest of the industry surges, and it's just the latest blow for the hedge fund

In a section of an investor presentation titled "Go-Forward Focus," it states that BlueMountain will "continue to issue multiple CLOs per year in both the US and Europe," and the affiliation with Assured Guaranty should "enhance the growth of the CLO business."

Assured and BlueMountain have had a long connection in the CLO business, Feldstein revealed on an earnings call for Assured Guaranty on Thursday morning: Assured wrapped BlueMountain's first CLO in 2005, just a couple years after Feldstein and co-founder Stephen Siderow launched the firm.

BlueMountain has launched 34 CLOs since inception and is the 16th biggest CLO manager globally, the presentation states.

Assured Guaranty is pumping significant money into BlueMountain's funds and CLOs, to the tune of $500 million over three years. Feldstein, who is receiving $22.5 million in Assured stock, will also invest up to $150 million in the funds.

See more: BlueMountain's head of fundamental credit is leaving the firm. Here's one of the last investments he pitched.

While CLOs seem to be the calling card, the presentation and earnings call left open the possibility of new hedge funds being launched if an opportunity is there.

"Leverage capital to support new products and other growth opportunities," reads a bullet point in the presentation on how the new asset management unit will operate.

BlueMountain has consolidated the number of strategies it runs this year, cutting two different equities strategies because they weren't profitable enough, and the presentation names the firm's core competencies as "alternative credit, global volatility, and fixed income."