Algebris CoCo Fund Up 45% As Market Swells

Nov 16 2012 | 12:56pm ET

Two years ago, Algebris Investments launched one of the first contingent convertible bond hedge funds. Now managing by far the largest such fund, it's reaping the rewards.

The Algebris CoCo Fund has returned 45% this year—better than 10 times the average hedge fund return—the Financial Times reports. And the firm sees growing opportunities for the US$900 million fund as banks issue more and more CoCos, which are designed to help them meet stricter capital requirements. The CoCos market could grow to as much as US$1 trillion in size, according to Barclays.

"The instruments are getting more and more complex," Algebris chief Davide Serra told the FT. And hedge funds with the ability to analyze the hard-to-value bonds and to trade them efficiently have a huge opportunity on their hands.

"If you own [financials] equity, your dividend yield has collapsed," he said. "If you own credit, though, you get paid a yield twice that of the equity. It's a no-brainer."

"Two or three years ago, we decided to refocus mainly on credit," Serra continued. "As a global financials fund, equity has become too random."


In Depth

Q&A: Schroders’ Forest Discusses Multi-Asset Investments On Eve Of U.S. Launch

Jul 17 2014 | 8:05am ET

Global investment manager Schroders has $446 billion in assets under management, $...

Lifestyle

Einhorns Busts At WSOP, Finishes In 173rd

Jul 15 2014 | 10:48am ET

Greenlight Capital founder David Einhorn’s World Series of Poker won’t end at...

Guest Contributor

Common Risk Parity Misperceptions

Jul 16 2014 | 11:02am ET

Over the past few years, risk parity has become a component of most investors’...

 

Sponsored Content

    Northern Trust Helps Hedge Funds Navigate Derivatives Regulations

    Jul 8 2014 | 10:48am ET

    The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…

Publisher's Note