U.S. hedge fund manager Chatham Asset Management will allow investors to take short credit exposures by going long a credit derivatives index in its soon to be launched Chatham Asset Partners Short Credit Fund. Larry Buchalter, president and portfolio manager in Chatham, N.J., said the fund will take static long positions in the Dow Jones iTraxx high-yield index, which comprises a pool of high-yield credit-default swaps.
The fund is designed for investors wanting to take a directional view that default swap spreads will widen, or for investors with credit exposures wanting to hedge their portfolios, he said. Chatham also offers an actively managed Chatham Asset Partners High-Yield Fund, with assets of USD750 million, which largely invests in cash instruments.
By taking exposure to the index the fund is attractive to investors that do not have the expertise to negotiate derivatives documentation themselves, said Buchalter. Investing in the fund also offers tax advantages over a straight investment in the derivative and it does not levy a performance fee, he added. Chatham also plans to offer exposure to the index through a managed account. Goldman Sachs is the prime broker of the fund, although Buchalter noted that the firm will shop between eight derivatives counterparties to ensure best execution.
