The Goldman Sachs exec who made $1 billion betting on the housing market is raking it in for a new fund
Now investors are piling into his new hedge fund - and backing its strategy of betting on homeowners.
Shelter Growth Capital Partners has raised more than $200 million since January, according to a person with knowledge of the matter, bringing its assets under management to $482 million as of July 1.
That's a big increase for the fund, which was started in early 2015 with just $11 million.
Shelter Growth buys mortgage loans, using leverage, or borrowed money, that can amplify investments. Including leverage, the firm managed at the start of June about $1.1 billion, more than double its assets, according to a regulatory filing. The firm is betting on the $13.5 trillion residential and commercial mortgage markets, which banks have pulled out of following post-crisis regulatory burdens.
The fund's affiliate, SG Capital Partners, creates mortgage loans programs, and it previously bought financing on homes that were foreclosed on during the financial crisis, according to a New York Times report in April. These homes had already been resold to low-income buyers at high interest rates in so-called "contracts for deed." The buyers, who no longer qualify for traditional mortgages, instead owe the Shelter Growth affiliate payments for the homes. These contracts have become popular for many investment firms because buyers can be evicted if they default, which doesn't happen as easily under traditional mortgages.
The contracts SG Capital purchased were a small part of the affiliate's holdings, were not in default and were worth less than $20 million, according to the person who spoke with Business Insider. The firm also plans to sell the contracts, the person said.
One of the hedge fund's early backers is Morgan Stanley, which has invested at least $28 million since October, according to regulatory filings tracked by data platform AltX. The bank invested via its Alternative Investment Partners program, which manages money for institutional and high net worth investors.
A Morgan Stanley spokesperson declined to comment.
Shelter Growth was founded in part by Sparks, who ran Goldman Sachs' mortgage-trading business before the financial crisis, helping the bank net more than $1 billion by betting against the housing market.
He ran the Goldman team that was responsible for the so-called Abacus deal, which the Securities and Exchange Commission alleged failed to disclose conflicts of interest with hedge fund Paulson & Co. to investors, among other charges. Goldman paid $550 million to settle the case in 2010. Sparks was not accused of wrongdoing and wasn't part of the settlement.
Other ex-Goldman mortgage staffers are also part of Shelter Growth's team. They include co-founders Justin Mahoney, now a senior portfolio manager who traded mortgages for the bank, and Kevin Gasvoda, the firm's chief financial officer who previously ran Goldman's credit loan trading business.