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 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

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!