Investing in Credit Hedge Funds: An In-Depth Guide to Building Your Portfolio and Profiting from the Credit Market
CHAPTER 1 Hedge Funds and the Credit Market 1
CHAPTER 2 High Yield Bonds 21
CHAPTER 3 Stressed and Distressed Investing 61
CHAPTER 4 Bank Loans 107
CHAPTER 5 Convertible Bonds 133
CHAPTER 6 Sovereign Debt 155
CHAPTER 7 Legal and Structuring 177
CHAPTER 8 Operational Due Diligence Program for Credit Hedge Fund Investing 201
CHAPTER 9 Risk Management 223
CHAPTER 10 Financing 251
Notes 283
Key Takeaways and Questions 293
Index 319
Following the credit crisis that rocked the global markets, many investors were left with a great sense of unease. However, when faced with historically low interest rates in a world awash with liquidity, they flocked back into the credit market.
But this wave of liquidity will soon come to an end. Investors are grappling with their need for return generation while trying to navigate an increasingly volatile credit market. Given its inherent flexibility, the hedge fund structure is ideal for investing in the credit market.
In Investing in Credit Hedge Funds, PAAMCO credit strategist Putri Pascualy shows how to profit from a variety of credit-focused investments, including:
- HIGH-YIELD BONDS - Capitalize on the inefficiencies in the market for levered companies
- STRESSED / DISTRESSED MARKETS - Develop mastery of the bankruptcy and reorganization processes to spot your best opportunities
- BANK LOANS - Take advantage of loans' structural seniority and collateral while navigating credit, liquidity, and operational risk
- CONVERTIBLE BONDS - Apply trading acumen to invest in hybrid instruments that combine the best features of bonds and equities
- SOVEREIGN DEBT - Understand the difference between the corporate and sovereign bond market and manage the macroeconomic risks in a credit portfolio
Investing in Credit Hedge Funds provides in-depth research on the most commonly used structuring vehicles, the legal rights and responsibilities of all parties, and the pros and cons of separately managed accounts. It provides practical, expert advice on conducting operational due diligence and best practices in mitigating counterparty risks to avoid the fates of those who suffered losses as Bear Stearns, Lehman Brothers, and MF Global went down. And it reveals practical risk-management techniques unique to credit investing.
Investing in Credit Hedge Funds provides a fully rounded education in creating a powerful credit portfolio that will instantly put you ahead of the investing pack.
PRAISE FOR INVESTING IN CREDIT HEDGE FUNDS
"Read this book if you want to understand how a leading hedge fund-of-fund investor evaluates distressed credit opportunities in the aftermath of the financial crisis." --Bruce Brittain, Executive Vice President, Product Management Group, PIMCO "Arms the institutional investor with the tools to conduct a more robust evaluation of a credit hedge fund's strategy, structure, and operational credibility. It is a practical resource for the diversified institutional investor." -- Susan Ridlen, Assistant Treasurer, Eli Lilly and Company
"Provides insight for investors to become more equipped to deal with the ever-evolving credit markets in the future." -- Lorraine Spurge, CEO of Maplestone Capital Advisors, LLC