CQS, Sir Michael Hintze’s (pictured) long-running multi-strategy credit-focused hedge fund firm, has launched a new actively-managed strategy which aims to generate higher returns across corporate sub-investment grade opportunities against a backdrop of increased volatility and unpredictable markets.
The CQS Total Return Credit Fund targets a range of geographies, asset classes and sectors, across various ratings classes, using a bottom-up, fundamental research process.
The UCITS compliant strategy – managed by Craig Scordellis, head of multi-asset credit, and Darren Toner, head of high yield investment grade and financial portfolios – will use an unconstrained investment approach to scope out the strongest opportunities and maximise risk-adjusted returns while aiming to curb volatility and potential defaults.
The fund will also use ESG (environmental, social and governance) processes as part of the portfolio-building process, including engaging directly with debt issuers to influence long-term corporate behaviours, promote responsible practices, and mitigate ESG risks.
CQS believes the mix of fundamental research and dynamic asset allocation will provide investors with an “attractive, potentially higher returning alternative to traditional, predominantly investment grade-focused multi-asset credit strategies”, at a time when wider credit markets have a lower yielding proposition combined with heightened volatility.
Commenting on the launch, Darren Toner said credit markets offer “extremely attractive” investment opportunities.
But he stressed that a fundamental, bottom-up research approach is key to meeting investors’ return expectations while navigating a “challenging environment” of low interest rates and increased market volatility.
“By assessing securities individually and then allocating dynamically across the full developed market corporate credit universe, we believe we can provide a compelling solution that meets investors income and capital gains requirements, whilst limiting their exposure to sources of downside risk,” Toner explained.
CQS was founded in 1999 by Hintze, a veteran equity and bond trader and former captain in the Australian army, with some USD200 million in support from Credit Suisse First Boston.
The firm went on to built a formidable two-decade track record investing in corporate credit, structured credit, asset backed securities, convertibles, loans and equities.
But the unprecedented events of the past year dented the firm’s earlier successes. Its flagship fund, CQS Directional Opportunities, reportedly lost around 36 per cent in 2020, while firm-wide assets took a hit during last year’s Q1 Covid-driven market turmoil.
The new fund will tap the broader investment expertise and capability of CQS’ Multi-Asset Credit Team, which has operated since 2013 and currently manages more than USD12 billion, as well as the wider CQS credit platform and asset allocation committee.
Earlier this year CQS hired Bob Paterson, former head of credit sales at Lloyds Bank and a well-known veteran of the global securitisation and ABS market, as a portfolio manager in its securitisation group.
