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Hedge Funds Junk Bonds

Hedge Funds Junk Bonds

Hedge Funds Getting Out of High Yield Bonds

Hedge funds have been dumping high yield bond positions recently as more and more non-alternative investors have joined in investing in junk bonds. The popularity of junk bonds seems to have led many hedge fund traders to dump high-yield bonds and loans.
Now, Ore Hill's $110 million Man Prospect Mountain fund has sold much of its high-yield debt, driven out by the flood of money from mainstream investors that has sent prices of junk debt soaring.

Prices are so high, "you have to take too much risk to hit your targets" in junk debt now, said Mr. Makhija, who focuses on distressed debt and buying or short-selling securities in anticipation of significant events. The fund is now heavily invested in mortgage debt.
Mr. Makhija is among a growing number of hedge funds and other professional investors that are getting out of junk bonds and buying assets like mortgage debt and stocks instead. As they exit, mom-and-pop investors are flooding in, along with mutual funds that are usually dedicated to other investments, like stocks and government debt. All are lured by the outsize returns delivered by the junk-bond market over the past 18 months amid tepid gains in stocks and rock-bottom yields on Treasurys. Source

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