PROFILE: DALTON INVESTMENTS LLC

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DALTON INVESTMENTS LLC

Established: 1998

Headquarters: 12424 Wilshire Blvd., West Los Angeles

Principals: Steve Persky, James Rosenwald and Gifford Combs

Assets: $800 million


Since it was founded a decade ago, Dalton Investments, a West Los Angeles hedge fund firm with $800 million under management, has found lucrative investment opportunities in the Asian equity markets.

But as economic troubles have spread across the globe, the firm’s core investments strategies have been hit hard. Its Edgebrook Partners fund and Dalton Greater China fund are down 79 percent and 62 percent for the year, respectively.

“Asia has done very poorly for the year,” said Steve Persky, chief executive of Dalton Investments. “The fortunate thing about Dalton is we have a number of strategies.”

The firm started a new strategy in July focusing on subprime mortgages, which Persky called “the ultimate distress opportunity.”

To manage the fund, the firm handpicked several former Countrywide Financial Corp. executives, including Todd Sherer, who had headed the group within Countrywide that traded distressed subprime mortgages. Countrywide, based in Calabasas, was the country’s largest originator of subprime mortgage loans before it was acquired earlier this year by Bank of America.

Through the U.S. Hedged Distressed Strategy, which has $150 million under management, Dalton Investments is purchasing bonds issued by trusts that buy the mortgages from underwriters. And since the subprime mortgage market is so toxic right now value opportunities abound.

“We’re buying (a bond) at cents on the dollar and it’s paying interest monthly,” he said. “It’s a very good environment to be a buyer of distressed mortgages because there are so many sellers and prices are really low.”

Persky did not specify the rate of return for its first five months, but he said it is positive at a time when the average hedge fund is down 16 percent for the year.

The firm is used to turmoil. It got its start during the Asian financial crisis in the late 1990s. Persky, a one-time Citibank executive who has managed investment portfolios for several firms, founded Dalton Investments with longtime friend and business partner James Rosenwald. The partners brought on Gifford Combs and each headed a separate strategy focusing on investment opportunities in Asia for private investors and institutional clients.

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