Alpha Exchange · Oct 9, 2026 · 52m · 34m saved
With Chris Hentemann, Founder and CIO of 400 Capital Management
400 Capital Management opened in October 2008 with $2.5 million, mostly Chris Hentemann's own money, and now manages about $8 billion in asset-based and securitized credit.
Most new hedge funds launch with outside money committed. Hentemann was close to signing an anchor investor in September 2008 when Lehman Brothers filed for bankruptcy. He dropped the capital he had arranged and started with his own.
"So I'm probably one of the few asset managers who could say the AUM starts at about two and a half million, and now we've organically built it to just about $8 billion." — Chris Hentemann
Chris Hentemann, founder and CIO of 400 Capital Management, on Alpha Exchange, has worked in mortgage and asset-backed credit since starting at First Boston in 1990. He moved to Salomon Brothers and then to Bank of America, where he ran the structured products business before leaving in 2007. His firm was a day-one investor in the credit risk transfer deals Fannie Mae created after the crisis, and has worked with Santander on bank risk transfers for about 10 years.
The full interview is covered here so you can skip it. 52 minutes of audio, 18 minutes of reading.
Here are the 13 principles that matter.
Key Takeaways
400 Capital started with $2.5M in October 2008 and has grown to about $8B without acquisitions
An anchor investor was about to sign the week Lehman Brothers failed
Banks that compete on balance sheet size worry him, because the pre-2008 boom rested on too little risk capital
After 2008, regulators overshot on caution, and that made US mortgage credit cheap to buy
The average FICO score on agency mortgages went from about 720 to about 765, by his recollection
He wants to see the unlevered return first, then the asset quality, then a structure with more upside than downside
In a risk transfer, the bank keeps the loans and the customer and pays investors to take the credit losses
400 Capital chose not to finance its OceanFirst position with bank loans, because that would put the risk back inside the banking system
Tail risk in private credit cannot be hedged in the market, so it has to be handled in the contract and the structure
He lends against power turbines, not data-center buildings, because a turbine can be sold for another use
He now prefers to be a second mover on crowded trades such as data-center and equipment financing
Interlinked AI credit deals resemble the contingent risks banks took in the early 2000s, he said
1. Launched in Lehman Week
Hentemann started in 1990 at First Boston, moved to Salomon Brothers and joined Bank of America in 1996. He described his trading seats as entrepreneurial: the bank gave him capital and expected him to build an edge and make money.
He compares the growth of consumer securitization to Michael Milken's junk-bond market of the 1980s
Milken found terms that let capital markets lend to companies with weak credit. That market went through a full credit cycle, and Drexel Burnham did not survive the correction, though firms such as Oaktree and Apollo grew out of that era. Hentemann's side of the business financed consumers rather than companies. Until the late 1990s those loans sat on bank balance sheets. Then securitization took off, and he said consumer credit repeated the same cycle in the 2000s.
From his seat at Bank of America he could see competition growing, leverage and capital becoming plentiful and oversight slipping. He said he could not forecast the timing, but he expected some form of correction and wanted to invest through it.
He left Bank of America in 2007 and spent the following year arranging capital
An anchor investor was about to commit when Fannie Mae and Freddie Mac were put into conservatorship, Merrill Lynch disappeared and Lehman filed for bankruptcy.
"Everybody went to the sidelines, all the capital I had arranged prior to that — I decided not to go through with it, just because the world had turned upside down much more quickly than I anticipated at that moment." — Chris Hentemann
He started instead with $2.5 million from friends, family and mostly himself. Putting his own money in, he said, sharpened what the firm was offering, at a time when nobody was funding a new platform in a dislocated asset-based market. The firm has since grown on its own to about $8 billion.
"I always tell people, we're a team that always lives with this reminder that we don't have a safety net." — Chris Hentemann
That, he said, is why he has "zero risk tolerance" for operational mistakes. The host, a former Bank of America colleague, said he launched his own broker-dealer during the same crisis, and that a hedge fund needs far more partners, including prime brokers and the Wall Street banks, which were then in trouble.
