Rothschild HDF Investment Solutions (RHIS), a division of Leucadia Asset Management, is to become the exclusive European partner for Topwater Capital’s first-loss investment strategy.
Under this arrangement, Rothschild will, on an exclusive basis, create one or more entities eligible for European investors interested in the first-loss investment strategy.
Topwater Capital’s first-loss investment strategy allocates capital to between 15 and 25 managers at any given time, who are each required to fund 10 per cent of their account from their own capital. Each manager’s capital is placed in a “first loss” position and will absorb 100 per cent of the losses that may be generated in their respective account. All accounts are structured as managed accounts with Topwater retaining ultimate custody and trading rights. If the manager’s capital has diminished to one per cent (from the original 10 per cent), the account is liquidated. The structure is designed to shield investor capital from potential loss by enhancing the investor/manager alignment of interest.
Topwater has been operating the strategy since 2002. It was acquired by Leucadia National Corporation in 2013 and has in effect re-launched the strategy under the new umbrella. The current fund was launched on 1 August 2013.
Marc Romano, CEO of RHIS, says: “The arrangement with Topwater is a demonstration of Rothschild’s commitment to deliver innovative investment solutions with the client in mind. Whether home grown or through value-add partnerships such as the one with Topwater, innovating to better address client needs is at the heart of our mission. Topwater’s first-loss investment strategy is a progressive take on the alignment of investor/manager interests and we are pleased to grant our clients access on an exclusive basis.”
Bryan Borgia, who is a co-head of Topwater Capital with Travis Taylor, says: “We are pleased to have entered into this exclusive arrangement with Rothschild. We have been extremely impressed with the Rothschild team, investment approach, and understanding of our business. This exclusive arrangement with Rothschild comes at a favourable time, as we continue to see ample opportunities to allocate capital to high quality investment managers. We believe that Rothschild, in addition to being a quality investor, will add a great deal of value to our investment program, and we look forward to working closely together.”