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Alternative Market Briefing

Investing in credit remains strong despite interest rate talks

Friday, May 16, 2014

Bailey McCann, Opalesque New York:

Despite fears that investors would run from fixed income as interest rates rise, panelists at the SALT Conference currently underway in Las Vegas, Nevada are finding a wealth of opportunities in credit. Across several panels, managers agree that several years into the boom for credit funds, there is more to come.

Indeed, even though interest rates in the US are expected to start rising at some point in the next few years, other macro factors like recapitalizations in Europe and a lack of lending are likely to keep asset flows going into credit. The latest asset flows data from eVestment shows that credit fund AUM is at an all-time high. The universe surpassed its pre-crisis peaks back in 2010 and has been in record territory since.

Persistent growth has been driven by the structural shift in the industry’s investor base as institutions have overtaken FoFs as primary investors and shown an interest in alternative exposures to familiar markets.

The changing face of banks was a constant refrain among credit investors. Non-performing loans,and nonbank lending and specialty finance were cited as opportunities by Deepak Narula Founder & Managing Partner, Metacapital Management. "Refinancing is over," he added by way of explaining the slow down in residential mortgage refinancing.

More esoteric opportunities were also discussed including rep and warranty bonds. These bonds may be part of a litigation settlement that offers an ......................

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