Thursday, October 25, 2012

Some Funds Leading Investors Into Debt Market's Darkest Corners



From Bloomberg: BlueMountain Capital Management LLC and Saba Capital Management LP are leading investors into the debt market’s darker corners to boost returns, buying securities from collateralized loan obligations to bonds that seldom trade.

BlueMountain, the $11 billion hedge fund firm in New York, raised twice the amount it anticipated this month from pension managers for a credit fund that buys CLOs, asset-backed securities and less liquid corporate bonds. Saba, founded by Boaz Weinstein, says CLOs are cheap compared with the underlying loans, while Citi sees banks “getting increasingly involved” in the securities for higher returns on capital.

Investors are casting a wider net as they face a fifth year of near-zero interest rates and bond yields at record lows amid Federal Reserve efforts to boost the economy and lower unemployment. Even the lowest-rated portions of CLOs, which were shunned after the financial crisis, are making a comeback…..

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