“We find the current opportunity set in high-yield credit attractive,” billionaire trader Loeb said in a recent letter to investors, referring to companies with lower credit ratings. He has raised his bets on corporate debt and plans to increase exposure as volatility accelerates, even though he does “not anticipate a quick rebound.”Article content
And Hintze, one of the most experienced names in hedge-fund credit trading, said he had used recent falls in debt prices to buy credit positions and to cut his fund’s hedges against falling prices in the sector. In Europe, high-yield funds have suffered 12.7 billion euros of net outflows this year to late October, equal to more than 15 per cent of their assets, according to JPMorgan Chase & Co. data, while investment-grade funds lost 25.2 billion euros in outflows.Article content, which track broad indexes of bonds and which have therefore had to sell a wide array of credits when investors sell out.
“Redemptions are leading to forced selling, which is leading to price declines. It’s self-fulfilling,” said the head of one European hedge fund that has been picking up bonds recently. “It’s already attractive and it’s probably going to get even more attractive.”Article content