Sun, 18/11/2012 - 17:12
Gina Germano (pictured), managing partner and head of sub-investment grade at Goldbridge Capital Partners, which launched its first funds this summer, says the specialist credit manager aims to generate consistently strong total returns through a rigorous investment process and fundamental research enabling the investment team to identify value while emphasising capital preservation and hedging market risk.
GFM: What is the history and background of your company, principals and funds?
GG: Goldbridge Capital Partners is a credit specialist established in 2011 to capitalise on the substantial long-term opportunities arising in the credit markets in the wake of financial regulatory reforms, the European debt crisis, and bank deleveraging and rebalancing, all of which have created immense demand for alternative sources of capital. The firm is owned by its partners alongside Northill Capital, an investment vehicle backed by the Bertarelli family.
Our product offering currently consists of the Goldbridge Credit Value Fund, an alternative credit fund that invests in European sub-investment grade debt, and Goldbridge Global Credit Opportunities Fund, a liquid long-short credit fund that seeks absolute returns in all market environments.
I am a pioneer investor in the European high yield market, having launched in 1998 the first Europe-focused high-yield fund, the Lazard European High Yield fund, which grew to become one of the best performing and largest funds of its type. I subsequently became a principal at BlueBay Asset Management in 2001, founding the high yield, distressed debt and loan businesses.
Head of investment grade Dipankar Shewaram has held senior roles at leading institutions for more than 14 years. Most recently, as head of non-US credit at Western Asset Management, he had responsibility for more than USD17bn in assets (plus oversight on a further USD4bn) and a team of 18 people. Dipankar was previously a principal at BlueBay Asset Management and co-head of the investment grade and crossover businesses, following spells at Deutsche Bank Asset Management, BNP Paribas and ING Barings.
GFM: What is the structure of your funds?
GG: At present, we have incorporated one umbrella fund in Ireland, Goldbridge Alternative Investment Funds, which currently has two active sub-funds, Goldbridge Credit Value and Goldbridge Global Credit Opportunities. The fund is set up as a unit trust with trading taking place through sub-fund-specific special purpose vehicles.
The unit trust is managed by an Irish-domiciled non-UCITS management company authorised by the Central Bank of Ireland. As an Irish-domiciled qualifying investor fund, it will benefit from the new EU passporting regime when the AIFM Directive comes into effect in June 2013.
GFM: Who are your main service providers?
GG: The funds’ administrator is GlobeOp Financial Services (Ireland), the auditor is PricewaterhouseCoopers and the custodian is BNY Mellon Trust Company (Ireland). Deutsche Bank acts as prime broker for the Credit Value fund and Barclays and Morgan Stanley for the Global Credit Opportunities. Linklaters is legal adviser on structuring and drafting matters, while Maples and Calder advises on regulatory and Irish-specific structuring aspects. The tax adviser is BDO.
GFM: What is your distribution strategy and targeted client base?
GG: We are looking to grow our business patiently by targeting sophisticated investors globally, primarily in the institutional space, including pension funds, insurance companies, foundations, endowments, funds of funds, single and multi-family offices, ultra-high net worth individuals and sovereign wealth funds. We are also in active dialogue with major investment consultants, given their significance within the industry.
GFM: What impact has the recent global financial crisis and economic downturn had on your business?
GG: When Goldbridge was conceived, one of the key factors identified as necessary to build a successful business was ensuring that the right partners were brought together. Each individual involved in the business has the same long-term mindset. To build a successful business in the current environment we need to ensure we deliver performance and align ourselves with our clients.
We have constructed a robust investment and business platform in terms of personnel and infrastructure, and we look forward to developing long-term partnerships with our clients, however difficult the market and operational environment.
GFM: Please describe your investment process.
GG: Through its investment process, Goldbridge seeks to generate consistently strong total returns, applying a rigorous investment process and fundamental research approach that enables the investment team to identify value while emphasising capital preservation, and hedge market risk – key to extracting attractive returns across the asset class.
Goldbridge highlights the importance of active proprietary research and monitoring. Analysts produce their own financial models, and aim to visit portfolio and target companies regularly for one-on-one meetings with senior management, site visits and interactive Q&A sessions.
Fundamental research focuses on the operating environment, growth prospects, competitive positioning, management, track record, quality of earnings, cash flow generation and conversion, balance sheet and credit standing, as well as contractual documentation and structure of a specific issue. The team performs a thorough analysis at sector and company-specific level to produce detailed and high-conviction bottom-up trade ideas that fit the top-down view.
GFM: How do you generate ideas for your funds?
GG: All team members generate research ideas, which are sourced from monitoring of the investible universe, counterparties and market contacts and news reports, and from existing situations and investments. The multinational and multilingual team is able to access opportunities across Europe, and has strong relationships with the legal and financial advisory communities in all major jurisdictions.
GFM: What is your approach to managing risk?
GG: Goldbridge believes that superior portfolio management and risk management are crucial components of the investment process. The firm’s portfolio risk management approach is systematic, robust and rigorous.
We believe that three key points, brought together, help to ensure the integrity of the portfolio risk management process: independence, collaboration and escalation. While portfolio risk management is an integral part of investment management, the independence of the process provides stronger controls and oversight. Broad and open information sharing is actively encouraged with regular informal and monthly formal reviews. And a clear and defined escalation procedure provides for optimal integration of the function within the business.
GFM: How have your funds performed?
GG: Credit Value was launched on June 11 this year and returned 6.7 per cent net up to the end of October. The fund targets an 8-12 per cent annual return net of fees. The portfolio is defensively positioned, maintaining a high cash balance (25 to 50 per cent), is hedged, and is deploying capital patiently. Security selection is concentrated on undervalued credits in defensive sectors such as food, healthcare, telecoms and utilities. Despite market volatility, the book returns reflect inherent value or ‘pull to par’ situations with defendable market position.
The Global Opportunities fund was launched on July 2 and returned 0.6 per cent net up to the end of October, with a 1.02 per cent net return for that month. The fund, which has an annualised return target of 8-10 per cent, aims to deliver absolute returns regardless of the general market direction through robust portfolio construction and risk management to maximise risk-adjusted returns. The portfolio is currently long systemic risk and short cyclical risk as growth disappoints.
GFM: Are you looking at any particularly attractive opportunities right now?
GG: In the past few months a number of core income names have brought notable upside, and certain high-coupon utility and telecommunication names were particularly strong. We continue to recognise good value across core positions and particularly in our event-driven basket, with selective exposure to peripheral corporates.
GFM: What developments do you expect to see in your investment sector in the coming year?
GG: Entering the fourth quarter, the team is adopting a cautious framework. Economic data continues to weaken, and eurozone and US political risk remains. We are particularly mindful that Spain has yet to request a bailout, with a Moody’s downgrade looming, and that Greece’s updated aid package has still not fallen into place. We therefore maintain a reasonable cash position, selling situations playing out or meeting our price targets, and remain well hedged on tail risk.
GFM: How will these developments affect your firm and the performance of your funds?
GG: Our investment strategy is to focus on careful cash deployment, relatively conservative positioning and consistent hedging. The team will take profits on situations that play out or hit price targets, selectively adding new investments as they arise and building high conviction longs opportunistically.
GFM: What do investors currently expect from managers?
GG: Investors expect managers to deliver on their (reasonable) expectations. As a result, managers must be honest and open regarding what is feasible in the current market environment. Investors are looking for trusted advisers with whom they can build long-term constructive relationships, not salesmen delivering pitches.
GFM: What differentiates you from other managers in your sector?
GG: Goldbridge seeks to align our partnership fully with our clients by constraining fund capacity, striving for excellent returns, employing consistent business practices and communicating transparently.
GFM: How do you view the environment for fundraising over the coming 12 months?
GG: Fundraising is generally a longer process than it was pre-2008. Institutional investors will only commit once they have done significant due diligence on the asset class opportunity, investment team and operational aspects of a business.
Given the low level of interest rates globally and the associated reduced yield levels, investors are seeking reliable yield-driven investment strategies. As a result, we are optimistic on fundraising opportunities over the coming 12 months.
GFM: How do you expect your business to be affected by current and proposed regulatory changes?
GG: We have considered all regulatory changes during various stages, from inception to product development, including advice from our external counsel during the structuring of our funds. Given that our funds are domiciled in an AIFMD jurisdiction, we have necessarily accounted for the AIFMD as it comes into effect.
Provisions covering the structure and use of depositaries, for instance, have already been built into our structure, whilst measures in other areas such as remuneration and disclosure requirements have duly been considered in light of the rules scheduled to come into force next year.
Goldbridge does not fall within the remit of the fund manager registration requirements of the Dodd-Frank Act, so a business we are less impacted by the legislation. However, on a macro level, the constraints on banks relating to derivatives and proprietary trading add to the problematic liquidity issues in the marketplace irrespective of jurisdiction. We have sought to take advantage of illiquid markets, with one of our funds specialising in high-yield and distressed securities.
GFM: Are you considering any mergers or acquisitions in the foreseeable future?
GG: No. Creating the best products for our clients is our first priority. We will grow Goldbridge organically and at a measured pace in line with our clients’ needs. We don’t want to be the biggest, but we do want to be the best at what we do.
GFM: Do you have any firm plans for further product launches?
GG: Goldbridge has plans in place to launch two additional funds. Spectrum will be a closed-ended six-year term vehicle investing in European stressed and distressed debt opportunities, while Goldbridge Credit Absolute Return will be a lower-risk, UCITS-compliant fund following a similar strategy to the existing Credited Opportunities fund.
Sun 18/11/2012 - 17:12
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