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Alternative Market Briefing

Opportunity to extract alpha from structured credit 'now much more difficult'

Friday, April 11, 2014

Fernando Guerrero
Benedicte Gravrand, Opalesque Geneva for New Managers:

Structured credit went out of fashion in 2008, then back again four years later. The asset class still offers attractive rewards for the bold, yet sagacious investor. A hedge fund manager with 27 years of experience in structured finance gives his perspective.

The term "structured credit" either frightens or excites depending on whether an investor is reflecting on the first couple years of the most recent financial crisis or looking forward to this year, wrote PIMCO, the biggest bond fund house (now with around $1.9tln in Aum), in early 2012. The firm went on to say that structured credit products had again attractive risk adjusted return potential as pricing reflected a more realistic view of the underlying fundamentals. That same month, Investcorp, a manager of alternative investment products with $10.5bn in AuM, had their own report saying, "We believe that notwithstanding the weak economy, there is a compelling multi-year investment opportunity for hedge funds that specialize in structured credit." Structured credit offers the steady stream of interest payments that are now in high demand thanks to the Fed’s monetary policy,......................

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