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Wall Street veterans build new Radnor fund

"I always wanted to get into equities"

Joseph F. Delaney III graduated from Villanova back in 1985 (post-Bishop McDevitt), picked up a couple of brainy business-oriented masters' degrees (UChicago, London School of Economics), then headed for Wall Street to make his fortune as a trader.

Now he's back, just down the road from alma mater, as president of Radnor-based Waterville Capital and its month-old, $50 million-asset Waterville Large Cap Value Fund, which he runs with partner Sean Bonner, a Radnor High and U of Delaware grad, former Philadelphia Stock Exchange firm owner and Deutsche Bank derivatives trader.

The fund opened long hospital stocks (Coventry Health Care, Humana) and "consumer discretionary" (Meredith Corp.), while avoiding financials and other companies with high financial leverage. "Health care's a value play that we thought was overly beaten up" due to other investors' fears over the new US healthcare proposals, Delaney told me. "The odds were in our favor that we'd get a snapback in value."

Bonner lives in Ardmore, Delaney in Princeton. They met on the years-long Acela rides back and forth to New York. Their commutes are shorter now. "I always wanted to get into equities," Delaney told me, "but there were no jobs in equities right after the 1987 stock market crash. So I got into commodities, and stayed 20 years" - the first 17 at Morgan Stanley, then with a group of Morgan Stanley veterans at Old Lane Capital Management LP.

Old Lane's most prominent alumnus is Vikram Pandit, who negotiated the firm's sale to Citigroup for a reported $800 million in 2007, and ended up as Citi's chief executive. Another is Guru Ramakrishnan, who heads $300 million asset Meru Trading Group.

Delaney headed Old Lane's commodity-trading office, which was in Radnor until Citi shut it in early 2008 - a story I broke here - on its way to merging Old Lane into its private investment group. Delaney and Bonner worked their local investment-advisor contacts, and raised the capital to start Waterville, named for their favorite town in Ireland.