Credit Hedge Funds
Credit Hedge Funds Having a Good Year
So far in 2012, hedge funds that invest primarily in bonds have done better than funds that trade primarily in stocks. Credit hedge funds have posted gains of over 4% in the first 5 months of the year, compared to 2.4% for their stock-focused rivals.
Over the first five months of the year, credit-focused hedge fund portfolios were up 4.11 percent compared with a 2.4 percent gain for stock-focused ones, according to hedge fund tracking service eVestment|HFN.
Well-known managers such as David Tepper and Daniel Loeb have seen hefty returns in their credit-focused portfolios on bets they made in the second half of 2011.
Some managers are profiting from those shrewd trades, which they made on mortgage-related securities, U.S. corporate debt and beaten-down European sovereign and corporate bonds. Others, meanwhile, benefited from an early move into junk bonds, which have been one of the credit market's better-performing sectors this year.
It is another indication that, in a year of great turbulence in the stock market, bonds have been the place to be despite the yield on the 10-year U.S. Treasury hovering around 1.61 percent.
"At the end of last year, European financials were massively battered down so we went long those corporate credits - they were great investments," said Peter Faulkner, a credit portfolio manager at $2 billion (1.3 billion pounds) P. Schoenfeld Asset Management. Source
