CVC Credit Partners - Best Specialist Credit Strategy Hedge Fund
CVC Credit Partners was established in 2005 and runs approximately USD20.2 billion across three core strategy areas: performing credit (USD15.3 billion), credit opportunities and special situations (USD3.3 billion) and private debt (USD1.6 billion).
The Credit Opportunities strategy, which was awarded the Best Specialist Credit Strategy Hedge Fund, employs a catalyst- driven investment approach, employing a dynamic hedging overlay designed to allow it to remain profitable through all stages of the credit cycle.
The strategy is co-managed by Oscar Anderson and Scott Bynum, both of whom are Senior Managing Directors of CVC Credit Partners. The deal team has relationships with over 200 sponsors and more than 90 advisors across Europe alone.
The strategy typically holds 35 to 45 event-driven instruments, inclusive of both longs and shorts. The majority of the portfolio’s net long positions are held in loans and corporate bonds, with a geographic tilt towards North America versus Europe although the strategy proffers no constraints on regional exposures.
Anderson says the investment philosophy at CVC Credit Partners is grounded in a fundamental approach to underwriting credit: “A commitment to understanding the issues around capital structure, cash flow generation, industry dynamics and intrinsic asset value is what underpins our process. When coupled with our comprehensive and collaborative style, we believe the result is a powerful vessel to value and ultimately price risk.”
The market has identified several major macro risk themes including slower economic growth and liquidity this late in the cycle. We anticipate 2019 will be a year where active managers should outperform given the sceptical tone that exists.
“We are excited about the investing landscape in front of us given our single name, bottoms-up approach. We believe that solid credit selection will be essential in this market and that is what we are built for,” says Anderson.
He notes that 2018 was a tale of two markets with the first three quarters proving to be orderly and accommodating, while the fourth quarter saw a massive technical sell- off which led to much of the corporate credit market being repriced.
Anderson believes the late cycle concerns that many investors have “are valid but low default expectations and positive GDP outlook should be supportive of credit”. “Furthermore,” he says, “we think the recent repricing has materially improved the opportunity set, particularly as it pertains to compelling event-driven situations.”
The strategy holds a mix of fixed versus floating rate loans in the portfolio but has historically tended to favour syndicated bank loans, giving the portfolio more of a floating rate tilt. “Also, as an event-driven strategy, we tend to focus on discounted instruments that have less exposure to rate and duration risk, even in fixed rate assets,” adds Anderson.
When asked how the team views US and European CLO issuance in 2019, Anderson feels that issuance will be “measured” over the next few months.
“With the recent rally in the leveraged loan market and continued tightening of asset prices the CLO arbitrage is challenged. As this is more technical in nature, tightening CLO liabilities and hopefully additional primary loan issuance may help improve the arbitrage. This process takes some time but we would expect CLO issuance to pick up in the second quarter.”
On winning this year’s award, Anderson concludes: “We are honoured to be the recognised by the industry and Hedgeweek. Our business is an eventful one to say the least and it is always a pleasure to get acknowledged for our hard work and commitment.”