With asset prices hovering around recent highs across many asset classes and volatility around historic lows, and with numerous macroeconomic risks with binary outcomes on the horizon, credit hedge fund managers have maintained a cautious stance in the first half of 2017.
Winners and losers have been fairly difficult to choose in recent months, as managers have focused on capital preservation rather than pursuing outsized returns. Few managers have been losing money but less than 10 have reached double digit figures so far. Broader credit markets have remained relatively calm too, as investor money has continued to flow into credit and markets have largely brushed off geopolitical risks.
Despite European elections, continued missile testing in North Korea and heightened tensions the Middle East, alongside growing concerns about the US administration’s ability to implement a comprehensive reform package, most major credit indices have tightened in recent months and volatility has remained close to historic lows.
Credit managers have told Alt Credit Intelligence the current focus is often to avoid trying to predict binary events such as elections, and instead investing defensively or holding cash in an attempt to catch any rally following a positive outcome, as was seen following the French election.
The range of returns was relatively equally spread across credit sub-categories, with no particular strategy outperforming. Funds focussing on government debt, investment grade derivatives, long/short strategies, distressed debt and structured finance all appeared in the top performing funds over the last three months.
Similarly funds with tens of millions of dollars in assets have performed in line with funds with well over $1bn. Two of the top performing funds over that period have been some of the newest.
Cheyne’s total return credit fund, which focuses on single name CDS trades and credit options has got off to a strong start since launching in November 2016, it has returned 9.9% over the last three months.
The Alva Disruptive Credit Opportunities Fund is up 5.9% over the last three months, and close to 13% over the last 12 months, the London- based firm’s CIO and investment director Alex Vaskevitch and Andre Klotz were featured in last month’s Alt Credit Intelligence, discussing how they use their understanding of digital disruption to find long and short opportunities in credit markets.
Two Asia-focused funds were among the top performing funds year-to-date, both focused on distressed debt. The Argo Distressed Credit fund and ASM Asia Recovery Fund both make the top 10 and not far behind them is the IP All Seasons Asian Credit Fund and the Triada Asia Credit Opportunities Fund.
This month, Alt Credit Intelligence began listing data compiled by sister brand Hedge Fund Intelligence. There are a few tweaks to the data on display, and the returns are taken from a slightly different pool of managers as a result. If you would like to ensure your fund is included in our performance tables, please contact Siobhan Hallissey on 0207 832 6677 or at firstname.lastname@example.org
Top funds for April
Top 20 Credit YTD
Top 50 credit l/s funds
Top 10 Convertible arb funds
Top 10 fixed income funds
Top 10 distressed funds
Top 10 Credit FoHF
Top 10 MBS funds
Top 15 Ucits funds
Top 20 ’40 Act funds
* ’40 Act data supplied by Morningstar