‘Street Fighter’
This much is sure: Chatham founder Melchiorre, 51, has a formidable reputation. A Chicago-area kid who studied economics at Northwestern and got an MBA from the University of Chicago, his high-toned education didn’t reduce the intensity of the former high-school football star.
After stints at Donaldson, Lufkin & Jenrette and Goldman Sachs Group Inc., Melchiorre landed at Morgan Stanley in 1998 where he rose to head the junk-bond trading group. He built his stature as a temperamental money-maker at the white-shoe firm.
His behavior infuriated some senior executives, according to former colleagues. Although not physically imposing, Melchiorre could be foul-mouthed and loud, and would berate fellow traders as he bopped around the trading floor in his stocking feet.
“He’s a street fighter,” said Mike Rankowitz, his boss at Morgan Stanley. “There are people who don’t like him. That’s because they are losing to him.”
After he departed amid a round of layoffs, Melchiorre quit Manhattan to join the “Jersey Boys,’’ a clique of hedge funders across the Hudson River that included billionaires Cooperman and David Tepper.
It was a lucrative move. Named after the leafy suburb where it’s based, Chatham has posted average annual returns of about 10 percent, trouncing many of its competitors. That kind of showing helped the firm attract $300 million from investors this quarter, a person familiar with the matter said. Long-term clients include the state pension fund of Chatham’s home state, New Jersey.
Yet its recent focus on tough-to-trade investments has given some clients pause, and initially drove off investors such as the Ohio state pension fund.
Price Mystery
The iPayment case thrust questions about Chatham’s bond-trading methods into the open. Grimstad claimed Chatham artificially drove down the price of the bonds by almost 30 percent in a single trade, effectively blocking a debt-restructuring effort so it could capture control of the company. Within weeks, the notes were back at about par.