Avenue Capital Group is set to launch a listed high-yield debt hedge fund.
The Avenue Income Credit Strategies Fund will invest most of its assets—at least 80%—in a variety of high-yield products, including leveraged loans and collateralized debt obligations. The fund may also invest in credit default swaps and currency derivatives, among other asset classes, Avenue said in a regulatory filing.
In its preliminary prospectus, Avenue wrote that it "believes that the changing investment environments over time offer attractive investment opportunities in the markets for credit obligations."
"To both capitalize on attractive investments and effectively manage potential risk, the Fund believes that the combination of thorough and continuous credit analysis, diversification of holdings and the ability to reallocate investments among different categories of investments at different points in the credit cycle is critical to achieving higher risk-adjusted returns, including high current income and/or capital appreciation, relative to other high-yielding investments," the prospectus reads. "The Fund expects to emphasize high current income and capital appreciation by investing generally in Senior Loans and in second lien or other subordinated loans or debt, including stressed securities and derivatives."
Most of the details about the new fund remain unclear. Avenue did not specify where it plans to list the fund, which firms will be its service providers or what fees it plans to charge. It did say it would sell the shares for $20 apiece, and that it expects to launch it next year.
Avenue's plans were first reported by Bloomberg News.