Ex-Barclays Tailor, Mosquera Start Bank Hedge Fund

Date: Thursday, March 18, 2010
Author: Bloomberg

Rupesh Tailor and Jose Mosquera, who worked together as credit traders at Barclays Capital, are starting a regulated hedge fund in Madrid to bet on a shake-up of the banking industry using default swaps, bonds and equities.

Tailor, 30, and Mosquera, 37, will seek to profit from mergers, spin offs and bail outs as banks emerge from the worst financial crisis since the 1930s, the traders said in an interview. They are initially seeking to raise $70 million for the Breogan Global Financials Fund and as much as $200 million by yearend.

“The financial sector is in an unsustainable state of disequilibrium surviving on government life support,” said Tailor, who joined Merrill Lynch & Co. in 2008 to head fundamental credit trading on its proprietary desk in London after six years at Barclays. “This creates a plethora of opportunities across the sector.”

Tailor said his recent successful trades include using credit-default swaps to bet against Icelandic banks, which moved from AAA to default in less than two years. Mosquera said he profited by buying subordinated debt of Lloyds Banking Group Plc before a March 2009 offer to exchange the notes.

Tailor’s trading earned a $25 million profit for Barclays in 2005, The Times in London reported. He started his career on Goldman Sachs Group Inc.’s credit desk in 2001 after graduating in economics from Cambridge University. Mosquera was head financial institutions credit trading at Barclays before moving to UBS AG in 2008 to reorganize its financial credit trading desk in London.

Seed Capital

Seed capital for the fund will be provided by Auriga Securities in Madrid as well as other investors, said Mosquera. Auriga is owned by investors including members of the Martinavarro family, whose citrus company supplies U.K. retailer Marks & Spencer Group Plc.

“In addition to a fantastic lifestyle, Madrid and the domestic Spanish market offers untapped opportunities for a sophisticated, absolute return asset management product,” said Mosquera, who has a master’s degree in international securities, investment and banking from the U.K.’s Reading University.

London Challenge

London’s position as the hedge fund capital of Europe is being challenged after the U.K. increased the income tax rate for people earning more than 150,000 pounds ($234,100) to 50 percent from 40 percent as it seeks to close a widening budget deficit. The British capital will become one of the most expensive financial centers after the new tax rate is introduced next month, the Wall Street Journal reported on March 8 citing a study by KPMG.

Spain’s top rate of income tax is 43 percent although employees entering the country can in some circumstances benefit from allowances reducing the rate to as low as 24 percent for an initial period, according to Ernesto Jimenez, a Madrid-based partner at law firm Garrigues.

The Breogan fund is regulated under Luxembourg law and marketed under the European Union’s Undertakings for Collective Investments in Transferable Securities, known as UCITS III. The funds have gained popularity as a way to invest in hedge funds with easier trading, transparency and increased regulatory scrutiny.

The $1.5 trillion hedge fund industry is accelerating Ucits listings to circumvent planned new rules for hedge funds that will restrict borrowing and access to European investors. Brevan Howard Asset Management LP, Marshall Wace LLP and Bluecrest Capital Management Ltd. have already started Ucits funds.