Emerging markets debt joins the ranking amid Singapore push

This month’s performance listing sees the inclusion of emerging markets funds, funds which gain their returns from the credit risk in emerging markets corporate and government related debt.

It’s been a tricky 2017 for emerging markets, but hedge funds have performed well on the whole. Currency and energy price swings which had hurt local currency debt in previous years has been less of a feature this year, and some large issues such as Argentinian debt have been resolved in favour of debt holders.

International politics has been much less predictable since the election of Donald Trump in the US, but markets seem to be shrugging off their initial fears of trade wars and border walls. For now.

Nonetheless, managers have been keen to build up in emerging markets, Alt Credit Intelligence has recently reported on Muzinich opening a Singapore office while distressed debt manager Värde Partners began hiring as part of its plans to double its headcount there.

One of the best performing funds in the city-state over the last 12 months isn’t necessarily an emerging markets debt fund, Ocean Dial Asset Management’s Sanchi Credit Value is a go anywhere fixed income fund “if you get stuck in a geography and doing one asset class in that geography, there’ll be periods when you can’t get returns. That is unless you take some huge risks or get into style drift,” Portfolio manager Pranab Pattanaik told sister publication AsiaHedge earlier this year. The firm has returned 27.4% so far this year, but has an annualised return of 9.2% after having a tough first year in 2014. Emerging markets debt managers reported holding high yielding government and bonds from large corporates in Brazil, Argentina and Hungary.

“We think of EM debt as three different asset classes,” says Alice Osborn, account manager at consultancy Willis Towers Watson, “Local currency sovereign, hard currency sovereign and hard currency corporate.” but adds that a corporate borrower still requires a strong sovereign credit background. Recent data also shows that inflows into emerging market debt retail funds have swelled this year.

Away from emerging markets, another new entrant to the listings is Marble Ridge, the flagship fund of Marble Ridge Capital. The New York-based manager was launched early in 2016 by former Paulson & Co portfolio manager Dan Kamensky, who had previously worked with Barclays and Lehman Brothers. After launching with $30m, the fund now has close to $500m in its distressed event-driven strategy.

The fund can invest up and down the capital structure of corporates globally, and looks for legal, regulatory or process related events, both long and short. It is currently roughly 50% invested in bonds and CDS, with the remainder in senior debt and equities, and 65% invested in the US with the remainder in Europe and Americas ex-US. Returns have come in close to 4% in the first half of 2017 with 0.5% returns in June after getting off to a flying start returning 27% in its first year.

Overall, the top performing funds this year now comprises a healthy mixture of different strategies, including distressed debt, structured credit, emerging markets and leveraged high yield funds. Unlike elsewhere in the hedge fund world, being neither too large nor too small appears to be a hindrance to credit managers at the moment, with funds in the tens of millions and multi-billion funds rubbing shoulders at the top of our performance tables.

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 June

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