Altana’s specialist credit strategy eyes short duration alpha plays after Q2 rebound

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Altana Wealth, the credit, currency and special situations-focused hedge fund led by former Trafalgar Asset Managers co-founder Lee Robinson, believes its specialist corporate bond strategy is well placed to generate further gains following a strong second quarter performance.

The firm’s Altana Corporate Bond Fund – which trades a range of short-duration investment grade and opportunistic high-yield and event driven credit themes globally – made 2.5 per cent in June, and rose more than 9 per cent overall during Q2.

The gains partly eased sharp losses suffered during the Q1 sell-off. But the fund’s USD share class was still down more than 7 per cent in the first six months of 2020.

In a flash update this week, Altana said that with interest rates remaining at or below zero, the ABCF’s short-duration profile and alpha-focused credit selections - coupled with credit hedge overlays to curb volatility - puts it in good stead compared to other index or high-beta, longer-duration funds.

“Over the coming months, we remain confident that we can rebuild investors’ capital to the all-time peak seen earlier this year,” the firm wrote.

Noting how the ABCF is negatively correlated to long-dated US treasuries, Altana said that long-term rates will eventually rise, observing that most other bond funds which posted positive performance in 2020 have done so on the back of falling rates.

“An increase in debt taken on by many corporates may lead to greater risk in the future due to potentially unsustainable debt structures. So investing in short duration credit should be safer.”

The Altana Corporate Bond Fund is run by portfolio manager Philip Crate alongside Altana founder and CIO Robinson, with a USD300 million capacity.

“Investors should avoid falling into the trap of believing that the recent strong performance of investment grade bond funds will continue,” the note said.

“Switching to shorter duration bond funds mitigates risk with the likelihood of similar if not better returns in the coming year.”

Altana added: “Investors require yield, especially above inflation. That can be achieved with very long duration investment grade credit with consequential downside risk. Or, more effectively, finding the alpha in short duration bonds by employing considered credit selection techniques.”

Altana Wealth was established in 2010 by Lee Robinson, the well-known veteran co-founder of event driven hedge fund Trafalgar Asset Managers, who earlier helped build Tudor Investment Corp’s risk arbitrage business.

Initially set up to manage Robinson’s personal wealth, Altana – which has offices in London and Monaco - was later opened to external investors. Today it manages an assortment of strategies spanning credit, currencies, cryptocurrencies, and special situations.