Wednesday, October 3, 2012

Investors Seeking Aggressive Hedge Fund Managers With Exotic Strategies

Structured credit strategies continue to beckon investors all over the globe according to a recent research report from Deutsche Bank.  Investors, it seems, like the return streams these folks are providing. According to London-based research outfit Hedge Fund Intelligence, funds employing credit strategies recorded a median return of 7.54 percent, more than double the return for all funds combined that are tracked by the company.

With investors earning a pittance on yields in the Treasury market, it’s no wonder they are seeking out savvy fund managers who are getting aggressive with more exotic credit strategies.  

The Deutsche Bank report, click here to read, recounts a recent visit to several Midwestern fund managers who discussed their best ideas.  More than a few mentioned structured credit instruments.

One manager recently told Reuters, ‘If you're willing to go out more into more illiquid, structured or complex trades, there's more opportunity, and potentially mid-teen returns’. Read the story here.

judge hand with gavel
Photo: s_falkow
So how far are these managers going out on the risk scale? 

Many are betting on collateralized loan obligations (CLOs), bank loans, and even some mortgage-backed securities that have been out of favor since the financial crisis hit.

Some say, that this time it’s different – both Deutsche Bank and Reuters point out that, unlike before the financial crisis, funds for the most part are not boosting returns with borrowed money.

The jury is still out. Stay tuned.


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