London-based BlueBay Asset Management could put close to E200 million to work before year-end in its long-only high-yield fund. Anthony Robertson, senior portfolio manager and co-head of high-yield, said the credit fund includes bank debt and credit default swaps and the manager plans to increase the proportion of both. "We currently hold about 8% of bank debt and CDS combined, but are looking to move that closer to 25% as our fund grows," he said, noting that bank debt offers seniority and stability as well as attractive returns. For this specific fund, BlueBay is targeting E500 million in funds under management a year from now, and E1 billion in two years hence," Robertson said.
"There's a lot of supply coming on in the next two quarters, which is likely to improve pricing in the primary market as well as the secondary market, as investors lighten up in certain names ahead of the new issues," said Robertson.
Some names that BlueBay is focusing on in the basic materials and chemicals sectors include Huntsman International, which is enjoying strong volume growth as well as improved pricing power. An initial public offering also appears likely over the near term. The paid-in-kind notes of Jefferson Smurfit, the European-based packaging company are also attractive, he noted.