A few stars share the spotlight in an otherwise steady month

August was a subdued month for most credit hedge funds. While only a few managers ended the month in the red, as was the case in July, only a handful of managers posted returns of 2%.

Nonetheless, a few funds did manage outsized returns in idiosyncratic markets. Emerging market debt and distressed debt in particular produced a few big winners, either over the month, or cumulatively over the last few months.

These returns do not appear to be the result of just a few fortunate trades, as many of the best performing funds were at the larger end of the AuM scale, from funds with assets of a $1bn or more – which would need a lot of their trades to come good to really shift the needle.

Contrarian Capital Management’s Contrarian Emerging Markets fund is over $1bn and invests in distressed emerging markets credits. It managed a return of 4.7% bringing its three month returns up to 8.8%.

In the broad long/short credit category, funds which are focused on structured debt or synthetic credit have risen to the top recently. In many cases these funds are also outperforming the more long-focused investors in similar structured products.

The products which many of these funds trade in typically contain some in-built leverage in some way. By using arbitrage or strategies based on relationships between these securities, these funds are not as reliant on continued spread tightening as long-only funds in the same sectors.

This month sees several funds debut in HFM Global and ACI’s rankings, including London-based Selwood Asset Management’s latest offering, which jumps to fourth place in our long/short credit listing.

Selwood Asset Management Credit Opportunity Fund 1, which launched in March of this year, was flat in August but is up 4.1% in the last three months.

The fund invests typically trades in credit derivative indices in Europe, the US and North America. Since its launch, the strategy has almost doubled its AuM from $54m to $100m. It was launched in 2015, by former Chenavari partner Sofiane Gharred. The firm also manages a Ucits credit fund.

US manager Pier Asset Management also makes its first appearance in the rankings, with Pier Special Opportunities Fund. Pier AM, which launched in June, debuts in 25th position on the long/short credit listing, having returned 2.4% in the past three months. The fund focuses primarily on short-term trades in the marketplace lending/peer-to-peer markets in the US.

London-based WyeTree Asset Management also joins our listing, with the WyeTree Residential Real Estate Total Return Opportunities Fund.  The fund, which comes in at 22nd in the credit long/short category, has returned 2.8% over the last three months.

Small funds in volatile markets continue to be the top performers year-to-date in credit. Former Kingdon Capital head Kyle Shin’s Gen2 Partners has two of the top 10 performing funds this year, with its CM Credit Fund –1 returning 55% through August. The fund has just $34m in AuM.

Pharo’s Gaia fund is the best performing fund with more than $1bn in assets at 6th in the overall credit category. Cheyne’s Total Return Credit Fund June 2022, and Deep Park Road’s STS Partners Fund, come in at 8th and 9th respectively.

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 shallissey@hedgefundintelligence.com

Top funds for August

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 ’40 Act funds

* ’40 Act data supplied by Morningstar