Are you a current or aspiring hedge fund professional interested in exploiting opportunities in distressed securities by investing in companies undergoing restructuring? But are you hung up on the “vulture investor” label?
You shouldn’t be, according to George Schultze, the founder, managing member and chief investment officer of Schultze Asset Management, a hedge fund with just under $200m under management that focuses on special-situation investing in financially troubled U.S companies and distressed credit. He was also recently appointed vice president of the Hedge Fund Association.
As a New York-based distressed securities manager who invests in any part of the capital structure and at any point during the restructuring process, Schultze actually embraces his identity as a vulture investor. In fact, he is author of The Art of Vulture Investing.
“Vulture investing is a term that lots of people use for distressed securities investing, including distressed loans,” Schultze said. “It means taking an ownership in companies going through a restructuring, or just getting paid in full on the loans we make to companies in distress.
“To me it implies the recycling of capital, rather than a bird picking at the dead carcass of a company,” he said. “It’s an opportunity for capital to be redeployed to industries that are expanding – a transfer of capital from dying companies to ones that have growth potential.”
How did Schultze get his start? What does it take to become a successful vulture investor?
While studying at Rutgers, Schultze won the Wall Street Journal Award for Excellence in Economics and the AT&T Investment Challenge. He went on to get his law degree and MBA from Columbia, where he participated in various investment competitions, winning a stock-picking challenge, and interned at Merrill Lynch and Fiduciary Partners, a trust company and fund of funds.
His first job was as an analyst in the distressed securities group of the asset management firm M.D. Sass, which has more than $7bn under management in hedge funds, private equity funds and mutual funds. After working there for two years, he decided to launch his own hedge fund, which is now 19 years' old.
“I had been managing money for my family when I started the business, initially just myself, and I grew it over time,” Schultze said. “I brought in team members over time, and there are currently 10 of us, a couple of analysts, a trader, administrative and back-office, our CFO and general counsel – we’re not looking to add to the team right now.”
When Schultze does look to hire, the quality of candidates’ experience is the most important thing he scrutinizes. He recommends the path he took: getting an MBA and a law degree from an Ivy league university or another top school.
“It helps to have the dual disciplines of legal and financial to find success in this industry,” Schultze said. “I make sure that whoever we are hiring gels with our team and fits in well by checking references, learning about what they’ve done and where they’ve been, and looking at their work product.”
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