Sir Michael Hintze of CQS, Elliott Management’s Paul Singer and Daniel Loeb of Third Point are among the big-name hedge fund managers currently building up their holdings in corporate debt, according to a report by the Financial Times.
The trio are among a group of managers betting that a sell-off sparked by steep increases in borrowing costs, which could lead to widespread defaults, has gone too far and there are now bargains to be had in junk bonds and other areas of the corporate debt markets.
The report says that in a recent investor letter, Loeb wrote that he found “the current opportunity set in in high-yield credit attractive”. He has raised bets on corporate debt as a result and plans to increase exposure as volatility accelerates, even though he does “not anticipate a quick rebound”.
And Elliott, who has played harbinger of doom recently warning that the world could be on the verge of its worst financial crisis since World War Two, Has reportedly told investors that opportunities in corporate debt and distressed investing are rapidly increasing.
Credit trading expert Hintze meanhwile, reportedly revealed in a recent investor letter that he has used recent falls in debt prices to buy credit positions and to cut his fund’s hedges against falling prices in the sector.
According to the Ice Data Services euro high yield index, yields on junk debt, which rise as prices fall, have jumped from 2.8 per cent at the start of 2022 to 7.8 per cent.
