Solus Investment Funds, which manages £3 billion in fixed-income assets, is looking to add Tussaud's Finance asset-backed securities to its Solus High-Yield Fixed-Interest fund, says Kevin Doran, fund manager. The planned purchase is part of Solus' strategy to build up its cyclical exposure. Tussaud's has exposure to consumer risk, but given the nature of the business, the long time it has been in operation, and its portfolio of well-trusted brands, the issue is defensive in nature, says Doran. Tussaud's Group securitized its tourist centers and amusement parks in 1999, and Doran is eyeing the single-A rated tranche that trades roughly 130 basis points over gilts.
Doran says the firm does not invest heavily in ABS issuance because of concerns of lack of liquidity in the secondary market. However, if the spreads are compelling, he will occasionally buy. In fact, he recently purchased BUPA's securitization of part of its U.K. hospital portfolio.
To further build cyclical exposure, Doran says he may add to holdings of Hilton Group's 7 1/8% of '12 and Carlton Communications' 7 5/8% of '07 and 5 5/8% of '09. He says Carlton, a U.K. media company, looks more attractive now that it has rid itself of satellite television arm ITV Digital. In addition, Doran has been buying defensive triple-B and single-A rated names such as Tate & Lyle's 6.50% of '12 and Imperial Tobacco's 6 7/8% of '12. He is buying lower quality credits with less-cyclical natures, because although he does not think there has been a confirmation a strong economic recovery is underway, he does think corporate defaults have stopped.
