Funds that are able to invest across the full range of structured credit were a hot topic, with attendees hopeful the vehicles will lure traditional asset managers to invest in structured credit. Collectively termed credit opportunity funds, one delegate described the portfolios to DW as credit hedge funds dressed up as collateralized debt obligations. The offical said several managers are planning to launch such funds next year.
Calyon is currently marketing such a fund for ACA Capital, according to an official at the French bank, who said investors include pension funds, endowments and family offices that do not rely on ratings for all their investments, unlike many other CDO investors. Ares Management andRiversource Investments have also either closed or are marketing funds.
The funds are free to invest across both cash and synthetic credit structures and can use varying leverage. Highly rated investments would be leveraged between 20-25 times while lower rated investments would be leveraged three times. The fees charged are around 1% of profits--less than a traditional hedge fund--although lock-up periods would be similar at between one to three years.
"In the next three to five years when the credit cycle turns, and it will, these funds will be a good place to be compared to some CDOs with less manager flexibility," said a portfolio manager for real money accounts in an aside to DW.
