Christopher Ricciardi, a former Merrill Lynch banker, was known as the “grandfather of CDOs” for helping popularize these complex structured products that blew up during the financial crisis.
Now, he is bringing his experience to another corner of the financial world with mounds of debt: student loans.
Mr....
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A decade after the financial crisis, The Wall Street Journal has checked in on dozens of the bankers, government officials, chief executives, hedge-fund managers and others who left a mark on that period to find out what they are doing now. Today, we spotlight former Merrill Lynch banker Christopher Ricciardi and Moody’s CEO Raymond McDaniel.
Christopher Ricciardi, a former Merrill Lynch banker, was known as the “grandfather of CDOs” for helping popularize these complex structured products that blew up during the financial crisis.
Now, he is bringing his experience to another corner of the financial world with mounds of debt: student loans.
Mr. Ricciardi joined the Andover, Mass.-based investment firm FlowPoint Capital Partners LP as a partner last year. The firm’s investment strategy relies in part on buying a product known as income share agreements, or ISAs. Under these arrangements, college students agree to give up part of their future income for a certain period in exchange for payments to cover all or part of their tuition. These products are meant to serve as an alternative to a student loan.
Charles Trafton, managing partner at FlowPoint, said Mr. Ricciardi is helping with the creation of what they call a new asset class. Mr. Trafton said the firm is trying to create a market for higher education by determining the true value of a college degree, factoring in variables like a student’s school and major. Students repay up to double the amount of tuition fronted, he said.
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Mr. Trafton added that Mr. Ricciardi was essential to creating the strategy. “His skills in helping create new asset classes and skills in securitization are really helpful,” Mr. Trafton said.
Mr. Ricciardi was a financial pioneer who bundled asset-backed securities into pools called collateralized debt obligations. These bundles were then sliced into so-called tranches of varying risk.
From 2003 to 2006, he helped transform Merrill from bit player to powerhouse in this lucrative business. The company leapt from 15th place among CDO underwriting ranks in 2002 to the No. 1 spot on Wall Street in 2004. Merrill’s underwriting total soared to $35 billion in 2005, of which $14 billion were backed mostly by securities tied to subprime mortgages—the debt whose blowup sparked the financial crisis.
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Mr. Ricciardi the following year jumped to Cohen & Co., then one of Merrill’s biggest CDO clients. In the 18 months after his arrival, Cohen’s assets under management quadrupled to $40 billion. But the value of many of these CDOs began to falter in 2007 as mortgage delinquencies rose.
Mr. Ricciardi declined to be interviewed for this story, though he answered some questions in writing. He said he objected to how media reports have portrayed his role during the crisis. “Sells papers I guess,” he said in an email.
Others have offered harsher assessments. Janet Tavakoli, founder of Tavakoli Structured Finance, a consulting firm that has done work on CDOs, said Mr. Ricciardi was a key figure in “one of several problems that led to the crisis.”
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After leaving Cohen in 2010, Mr. Ricciardi helped launch Mead Park Management LLC, a hedge fund that focused on selling collateralized loan obligations, a subset of CDOs. Mead Park is no longer in operation; Mr. Ricciardi said in an email he left in October.
In addition to his work at FlowPoint, he founded PLAAY Sports, a sports-video-editing company using artificial intelligence, he said in another email.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com