Boston-based Boldwater Capital Management has reopened its Boldwater Credit Opportunities Master Fund for an additional $100 million of capacity. The intra-company capital structure arbitrage strategy was launched roughly three years ago and currently has around $260 million. It was soft-closed six months ago but is being reopened due to increased investment opportunities in bank loans and credit default swaps.
When the fund was launched three years ago, the asset level was not high enough to support bank loan and CDS investing. With an increased ability to use these tools, there is more capacity for the strategy. The current state of the high-yield market also makes reopening the fund appealing. Although many players in the high-yield market have been battered recently, Boldwater fared better because the increased volatility has benefited its capital structure arbitrage plays.
Boldwater's investors have been mostly institutional, including foundations, endowments and pension funds. The fund was up roughly 1.8% for the first quarter and has very low volatility. Boldwater has also been heavily hedged by taking long positions in floating-rate bank debt, while going short junior securities.
The firm is also planning to launch a second fund, which will mainly consist of non-directional strategies, including relative value and capital structure arbitrage as well as directional strategies. The Partners Fund is slated to be rolled out in the second quarter. A Boldwater official declined to comment.