NEW YORK - Two executives of CS First Boston Corp., including the firm's former chief economist, have opened their own investment management firm.
Neal M. Soss, managing director, chief economist and head of global research, and Robert Cotton, vice president of investment services, have formed Soss & Cotton Enterprises L.P. The firm, which will be based in New York, will offer a conservative hedge fund for institutional investors and be affiliated with Gilman Securities Corp.
Soss & Cotton will manage a conservative hedge fund employing fixed-income securities, seeking to protect principal while delivering returns.
"We're not shooting to make 60% a year," said Mr. Cotton. "We think the background of people who make that kind of money is that they're taking that kind of risk."
The fund will be looking for long-term economic situations that provide opportunities and will often be in the U.S. government securities market, said Mr. Cotton. It won't deal in mortgage-backed securities and will use some derivative exposure, he said.
"We may do derivative securities, but we'll do them in a fashion we think is safer. Buying puts and calls is as safe as you can get," said Mr. Cotton. "We don't want to expose (the fund) to huge changes in valuation."
Soss & Cotton is the process of registering with the Securities and Exchange Commission and expects to be ready to begin marketing efforts later this month. The firm's initial staff of three - Messrs. Soss and Cotton and an operations staffer - may increase within a year, said Mr. Cotton.
Messrs. Soss and Cotton will serve as managing directors of the firm and both men will meet with clients and conduct marketing. Mr. Soss will head the macroeconomic research, looking for long-term opportunities to take positions in the market, while Mr. Cotton will oversee the execution of trading.
Prospective clients are institutions and high-net-worth individuals, two segments where Mr. Cotton said the partners complement each other. Mr. Cotton said that while his experience has been mainly in the high-net-worth area, Mr. Soss' 10-year background with First Boston is in the institutional arena. A spokesman for CS First Boston Corp. said they have not yet been replaced.
Gilman Securities is providing start-up capital for the venture and will make an initial $10 million investment in the new fund through one of its affiliates. It will hold an undisclosed stake in the firm, which will be reduced as the business grows. The firm will be independent from Gilman, said Mr. Cotton.