Craig Effron and Curtis Schenker: Scoggin Capital Management

Craig Effron and Curtis Schenker are what David Einhorn was before the Lehman debacle- brilliant hedge fund managers generally flying under the media’s radar. Head of Scoggin Capital Management, they invest in mergers, spinoffs, bankruptcies, and financially distressed companies through stocks and bonds.

Curtis Schenker

Here is what Katherine Burton wrote about Scoggin in Hedge Hunters:

“Between 1988, the year he started the fund, and August 1, 2007, he produced average annual returns of 18.2 percent a year, after fees and using no borrowed money. He had only one losing year, 2002, when he was down 1.3 percent. His returns are not correlated to the stock market, and 90 percent of the time, his funds make money in the months the Standard & Poor’s 500 Index is down.”

Einhorn paid just homage to Schenker in Fooling Some of the People All of the Time. The reason Schenker managed to make money when the market is down is that he protects himself at the first sign of trouble by buying put options on the market indices, or shorting them using ETFs or futures when options are expensive. He doesn’t short individual stocks as a hedge, but he sometimes sells short if he believes that those stocks are going to go down. So he tries to create some value on the short side as well.

Buying put options or shorting market indices isn’t a magic formula for success. It’s more like buying insurance- which has a real cost. The upside of buying insurance is it enables your survival. Many hedge funds shut down after catastrophic (30+%) losses because they have to earn back all their losses before collecting incentive fees again. In most cases key employees don’t want to work for less money for a couple of years, so they quit.  As a result, hedge funds lose their edge and rationally shut themselves down. Craig Effron and Curtis Schenker’s Scoggin lost more than 30% between December 2007 and March 2009. Luckily, most of the other hedge funds performed horribly and there was no appetite for seeding new hedge funds. So Scoggin employees stayed put.

One of Craig Effron’s favorite investments is China. “When I got to China, I realized immediately that we were in America 1910. Today in America everyone hates everyone. There is so much negativity. In China, it is all positive. I don’t know how it will play out, but this place is for real.” says Effron. Clearly he doesn’t agree with Jim Chanos, who is a bear on China’s property market.

Scogging’s latest 13F filing reveal that Craig Effron and Curtis Schenker have several of the stocks David Einhorn’s Greenlight Capital has. Apple (AAPL), Carefusion (CFN), CIT Group (CIT), Ensco PLC (ESV), Flagstar Bancorp Inc (FBC), Market Vectors Gold Miners ETF (GDX), Microsoft (MSFT), Pfizer (PFE), and Sprint Nextel Corp (S). Interestingly, Scoggin started buying Sprint Nextel before David Einhorn did. So it might be David Einhorn who is monkeying Scoggin in this case.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!