Arkaim Advisors, a specialist in emerging market corporate debt investments, is to launch a new hedge fund, which will focus on global distressed and credit opportunities – with an particular emphasis on emerging markets.
The Distressed and Credit Opportunities Fund will be managed by Chief Investment Officer, Dimitry Griko, who has led Arkaim’s existing EM high-yield corporate debt strategy since 2015, alongside the five-strong credit team.
The investment strategy of the new hedge fund will use the same expertise applied to Arkaim’s existing Emerging Markets High Yield Corporate Debt Fund, which despite being unlevered, long only, and operating under daily liquidity constraints, not only matches but often surpasses the performance of many distressed hedge funds in the market.
The approach of the new fund – like the UCITS fund – will have a strong focus on downside valuation. This strategy includes the assessment of downside risks and enforcement of recovery – both crucial components for managing a credit portfolio. Understanding, and valuing recovery offers a safety buffer for the performing positions and acts as the key profit driver for the non-performing debt.
In a press statement, Griko said: “Reflecting on the success of our current long-only Emerging Markets High Yield Corporate Debt Fund, we expect that the removal of liquidity and other UCITS-related constraints will allow for significant improvement of performance and crystalise our expertise.
“While the nature of the distressed assets in the new fund’s portfolio will inherently make it less liquid compared to our current fund, which has daily liquidity, it nevertheless promises to offer a higher degree of liquidity than comparable distressed funds, especially those involved with private debt.”
The Distressed and Credit Opportunities Fund’s investment strategy will comprise: performing distressed debt, which will aim to generate significant cash yield and overlap with the riskier part of the current UCITS Fund; non-performing debt, which will look to generate returns through the maximisation of recovery of defaulted debt; and a credit long-short element, to maximise issuer selection alpha, provide a buffer against market direction fluctuations, and aid in reducing overall fund performance volatility.
