Swiss Hedge Fund Launches Credit Fund of Funds

Nov 3 2008 | 11:10am ET

Zurich, Switzerland-based Hedge Fund Capital Management is launching a fund of hedge funds to take advantage of the major dislocations that have taken place in credit markets in recent months.

The Credit Opportunities Fund will initially focus on two main sectors: corporate debt markets (predominantly first lien loan and credit long/short managers) impacted by the financial sector freeze on lending and global liquidity crisis; and securitized debt markets (predominantly mortgage backed securities/asset backed securities managers), which have suffered due to the subprime mortgage debacle and global liquidity crisis.

Corporate and MBS/ABS securities are priced at historically low levels, in many cases discounting default rates rising to and remaining at levels significantly above anything seen in the past 50 years, according to Iain Hamilton, portfolio manager.

“Managers who have been able to avoid liquidating positions are now holding heavily marked down assets which have the potential to deliver attractive performance through the significant coupon/loss adjusted yields (carry) and capital appreciation (pull to par) available at the moment on these “frozen” illiquid investments,” said Hamilton. “We see an immediate opportunity, similar to that exploited by investors in the aftermath of the S&L crisis of the early 1990s and following the corporate defaults of the early 2000s.”


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