How Many Yachts Can John Devaney Water-Ski Behind? - TheStreet

How Many Yachts Can John Devaney Water-Ski Behind?

None -- now that he's selling his, <I></I> has learned.
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The seas have turned decidedly choppy this summer for United Capital CEO John Devaney.

has learned that the hedge fund manager has put one of his most prized possessions -- a 142-foot Trinity yacht dubbed

Positive Carry

-- up for sale, along with his $16.5 million second-home in Aspen, Colo. The house, called Sardy House, is the site of the nation's largest living Christmas tree.

A call to Devaney was not returned and officials at his Key Biscayne, Fla.-based hedge fund declined to comment. But according to Web site, Devaney is asking $23.5 million for

Positive Carry

, which boasts a 42-inch retractable plasma screen with theater sound, a sun deck, an eight-person jacuzzi and barbecue area.

The motor-yacht's name is derived from a trade in which one borrows at low interest rates at the short end of the yield curve and invests at higher rates at the long end. How much the trader is asking for Sardy House -- an 1892 Victorian mansion that isn't believed to be named after any trading strategies -- couldn't be learned.

The moves come as subprime woes have dimmed the outlook for the Horizon family of funds managed by the United Capital chief. Devaney, famously the subject of an

Institutional Investor

profile entitled "Trading on the Edge," made his name as a hotshot, gun-slinging trader.

But a few months ago he bet wrongly that the ABX index -- used to hedge securities bets in the mortgage market -- would shake off jitters and see a pop. Instead it collapsed, leaving Devaney trying to bail out his funds.

After freezing redemptions in June, Devaney is still struggling to keep his investment vehicle afloat, as his investors are running for the exit. United Capital has assets under management of $620 million -- a good chunk of which has been frozen.

Positive Carry, pictured in happier times


How desperate the situation might be for United is best evidenced by Devaney's latest moves.

Devaney also hired international law firm Morgan Lewis & Bockius in anticipation of potential lawsuits resulting from a possible collapse of the troubled hedge funds, according to a source who is familiar with United Capital's management.

A spokeswoman for Morgan in Miami said that the firm does not disclose its clients.

Subprime problems have been sweeping Wall Street this year. The plunge in the value of securities tied to loans made to homeowners with poor credit histories took down a pair of hedge funds affiliated with

Bear Stearns


this month.

But Devaney saw an opportunity to bet millions of dollars, including his own net worth, on a spike in the ABX. Apparently he believed either that the worst might be over in the subprime market or that he could bang out a return on positive sentiment.

"Some investors are extremely scared by the recent price action and volatility of this new index product," he said back in May, adding, "I should do well in this environment."

He could not have been more mistaken, a fact borne out by the recent action in the ABX, which has been teetering around record lows. One senior asset-backed trader noted that Devaney was not alone in his thinking. Leverage was being offered freely to investors, which made it possible to ratchet up the return on winning investments -- and the losses on losers -- by 10 or 20 times.

United has claimed that the fund will remain open and that it has ample liquidity, but the offloading of Devaney's personal assets sends a different message.

Devaney has about $100 million of his family's own money tied up in the funds, according to published reports. Smoothing out this situation is on the forefront of his mind as well as his wealthy clients.

The ostentatious trader, known for throwing rock-star parties and hiring bands such as the Counting Crows and comedians like Jay Leno to entertain clients and friends, cut his teeth at small brokerage firm Capital International Securities Group. He has had big-league aspirations, both political and professional. Devaney helped to make a bit of a name for himself by trading in esoteric asset-backed securities and generating big returns based of the collapse of Long Term Capital Management. He formed United Capital in 1999 and has built his net worth up to around $250 million, according to



Devaney has contributed big sums of money to the Republican party and once invited Senate majority leader Bill Frist on his yacht. By winning a charity auction, the United Capital chief also had an opportunity to get an audience with Omaha investment guru Warren Buffett -- a man whose success he'd like to emulate.

The troubles with Horizon might hinder Devaney's plans, but Wall Street money managers have come back from worse.