Attractive Opportunities in the Credit Space
Throughout the year, BHA has published many articles noting investor preference for liquid, short-term, trading-oriented strategies. Many investors are continuing to add liquidity to their portfolios in the event that 2008 trends reoccur. During the past few months, however, analysts have have spotted another trend.
Many investors are currently seeking illiquid asset strategies, such as credit funds. One reason for this trend may be that investors are chasing returns. Certain credit strategies, such as distressed credit, have been good performers this year. The Barclay Distressed Securities Index shows a gain of 7.67 percent year to date.1
Another reason may be that investors are seeing the opportunities that exist and believe them to be a safe investment for the next few years. “The beta play that everyone could make in 2009 is over. With credit spreads now much tighter, there is more desire among investors for market neutrality, the strategies like long/short credit, credit arbitrage and credit relative value,” said a chief investment officer of New York-based consultant.2
BHA’s analyst team has heard from investors about their ongoing interest in credit funds. For example, a wealth adviser based in New York, which is planning to allocate $1 million to $2 million before year end, is interested in long/short credit. Funds with exposure to bank loans are highly preferred. Investors are also researching distressed credit and long-only credit funds.
During the last three months of the year, BHA will monitor investor interest to see if credit begins to become popular among other investors, such as family offices, endowments, and foundations.
1 Barclary Hedge, Barclay Distressed Security Index, October 12, 2010
2 Pensions & Investments, “institutional investors pick credit funds over equities,” October 4, 2010