Andrew Feldstein: “Credit Derivatives Are Incredible Valuable Tools”

Andrew Feldstein, founder of Blue Mountain Capital, talks about the role of credit derivatives in financial markets on Bloomberg.

Andrew Feldstein said: “I think credit derivatives are incredible valuable tools to the financial markets, and I think the financial markets would be much worse off without them. Like the automobile, the financial instruments can be misused. If you got a drunk driver behind the wheel, or if people don’t obey the rules of the road, or the rules of road are poorly written, valuable tools can be misused and the consequence can be bad.”

Feldstein left JPMorgan at 2003 because he has a “real entrepreneurial drive to create something and to build something”.

According to Bloomberg, within a year of launching Blue Mountain, Andrew Feldstein and Stephen Siderow expanded the team from 10 to 50, and now they have 120 employees with offices in New York and London. In 2010, Blue Mountain’s credit alternatives fund returned 8.5% to 9.0%, nearly double the industry average. Eighty percent of these gains came from trading individual credit default swap along with collateralized loan obligations.

Feldstein believes the problem in Washington is simple to describe – we have borrowed too much and we made too many promises. The borrower and the entitlement holders of pensions and medical cares have certainly aggravated this trend. But Feldstein said it’s hard to solve the problem.