CQS Sees Credit Rally Continuing

Aug 11 2010 | 10:51am ET

Quantitative hedge fund firm CQS made a tidy profit betting on a credit market rally last month, and remains bullish on fixed-income.

The London-based firm, which manages US$7.5 billion, saw its flagship Direction Opportunities fund return 6.9% last month. CEO and fund manager Michael Hintze credits rising bond prices for the success of the fund, which is up 11% on the year.

“Markets had moved downwards and valuations were beginning to look more attractive in light of generally positive Q2 earnings,” he told Reuters.

CQS poured more money into both investment-grade and junk bonds over the past three to four weeks, he added. Hintze said that slow economic growth in the U.S. and Europe would keep interest rates down, encouraging new issuance.

“As markets have rallied, we’ve begun to take a little bit of credit risk off the table in financials and property, but we’re still positioned for a continued improvement in credit markets in the short term,” Oliver Dobbs, the firm’s chief investment officer, said.

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