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Alternative Market Briefing

Alternative credit strategies can offer appealing returns if handled cleverly

Tuesday, February 04, 2014

Benedicte Gravrand, Opalesque Geneva:

Interest rate and credit risk premiums are at record-low levels due to the macroeconomic environment and the global reach for yield. Furthermore, the sell-off in fixed income that took place last summer could lead to a more volatile fixed income and credit market environment in the future. Traditional fixed income investing has become unattractive. So what can be done within fixed income? The best way to go about it, argues a recent White Paper from Gottex, the Swiss fund of funds manager, is to implement an investment strategy that seeks to reduce the beta to traditional risk factors and makes sure its liquidity is able to withstand or even exploit short-term price volatility. And such "alternative credit strategies" are available in the market today.

According to the authors of the paper (A case for alternative credit strategies, Jan.14), Edward Russell, head of fixed income strategies and Philipp Rieder, senior credit analyst, alternative credit strategies "can harness the entirety of the global credit markets, but focus on the following sectors: leveraged corporate credit, structured corporate credit, synthetic corporate credit, distressed corporate credit, agency and non-agency residential and commercial mortgage-backed securities (RMBS and CMBS), non-mortgage asset-backed securities (ABS), collateralized loan obligations (CLO), and collateralized debt obligations (CDO)."

There are several interesting alternative credit str......................

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