Lazard Asset Management has unveiled a new long/short credit UCITS hedge fund which trades investment grade, crossover, and high-yield bonds in Europe and North America.
Lazard Asset Management has unveiled a new long/short credit UCITS hedge fund which trades investment grade, crossover, and high-yield bonds in Europe and North America.
The Lazard Coherence Credit Alternative Fund replicates the original Lazard Coherence Long/Short Credit strategy, which launched in August 2012. The strategy’s “early mover” portfolio is built around Lazard’s view that fixed income markets are an extension of equity markets, and makes investments ahead of yield spread and price changes which are driven by earnings and credit ratings momentum.
Managed by Sal Naro, Vincent Mistretta, Michael Cannon and Sanjay Aiyar, the fund looks to generate absolute returns and maintain capital preservation, and will aim to curb interest rate volatility through hedging and other risk management processes.
The strategy employs a top-down macro view to zero in on relative value opportunities across and within certain credit sectors, which is then fused with a proprietary, multi-factor model that systematically identifies specific long and short opportunities, Lazard said.
Allocations in the portfolio are grouped by their expected return drivers – core holding, event driven, relative value and so on – and are actively managed based on potential market opportunities and the macro landscape.
“Persistently low interest rates have led to a surge in corporate debt issuance. Yet the changing economic environment and eventual withdrawal of central bank stimulus could lead to significant credit migration, causing challenges for investors that have moved down the ratings spectrum in search of yield,” said Sal Naro, managing director and portfolio manager on the Lazard Coherence team.
“By viewing bonds as an extension of equity markets, rather than adopting a traditional fixed income approach, we seek to identify sector and credit spread migration early, leading to greater return potential, while looking to limit the tail risk for investors.”
The original Coherence Long/Short Credit Strategy has recorded an annualised return of around 8 per cent net of fees since inception, with a realisable Sharpe Ratio in excess of 1.5.
The new launch will further expand Lazard’s Alternative Investment Platform, which currently manages about USD3.9 billion in client assets.
Lazard Asset Management manages a range of equity, fixed income, and alternative investments globally. Together with affiliated asset management companies in the Lazard Group, the firm manages some USD272.6 billion in client assets.
