Cheyne Capital gains traction with credit dislocation focus, as long/short hedge fund maintains momentum

Stuart Fiertz, Cheyne Capital

Cheyne Capital, the London-based credit and multi-strategy alternative investment manager, has continued to attract investor allocations during this year’s turbulence with its focus on market dislocations, as its thematic long/short equity hedge fund notched up successive gains in March and April.

“We’re known for stepping early into dislocations, such as real estate debt in 2009, social property in 2014, and sub-investment grade credit ahead of IFRS 9 in 2018,  so we took in approximately USD500 million of investor allocations across our strategies during March and April,” said Stuart Fiertz (pictured), co-founder and president of Cheyne.

The firm’s Thematic Long/Short Equity Fund was a “notable outlier in March,” Fiertz said, advancing 5.3 per cent while other hedge fund strategies stumbled as growing Covid-19 fears hit markets globally.

The strategy later gained a further 6.4 per cent in April, giving it a year-to-date return of some 13 per cent.

Elsewhere, in its liquid strategies, Fiertz said the experience “has probably been like that of many other managers: a mark-to-market decline in March and a strong rebound in April.”

Fiertz co-founded Cheyne Capital in 2000 alongside Jonathan Lourie, the pair having previously worked for Morgan Stanley since 1991.

The firm specialises in a range of credit assets, real estate debt and equity, and equity-linked investing. It is particularly well-known for its focus on credit, particularly alternative credit, where opportunities in non-bank capital markets financing have surged during the sustained bank deleveraging and prevailing negative rates environment over the past decade.

Last month, the firm unveiled the Cheyne Impact Real Estate Trust, its second impact real estate fund, which will deploy an initial GBP150 million across long-term, affordable housing initiatives in the UK, working alongside councils, housing associations and charities.

The strategy’s focus spans affordable and key-worker housing, supported living facilities, care provision and mixed tenure developments.

“On the private markets side, our investment philosophy is to help fill the gap in financing left by the withdrawal of traditional providers, such as where European banks have become constrained by regulation from lending on certain types of real estate such, or above certain LTVs, or from holding stressed, but performing, corporate loans,” Fiertz said. 

“In the same way, traditional equity provision for UK affordable housing in the form of government grant has fallen sharply over the past decade and alternative sources of capital, such as ours, are required.”

The firm declined to comment on reports this week that it is also planning a new USD325 million distressed debt hedge fund focusing on a range of credit assets hit by this year’s coronavirus-driven downturn, predominantly in Europe with some US exposure.