London-based credit specialist Cairn Capital Limited is launching a Subordinated Financials Fund. The Fund is expected to launch on 3 October and has around EUR45 million (GBP39 million) of committed seed capital.
Seed capital is coming from two of Cairn Capital’s existing investors; Stanhope Pension Trust, a UK corporate pension fund, and San Bernardino County Employees’ Retirement Association, a US public pension fund.
The fund’s objective is to deliver double digit annualised returns from investments in subordinated financial debt instruments, primarily legacy instruments and predominantly within Europe. Cairn Capital believes the sovereign and regulatory stresses impacting the market are providing an opportunity to generate excellent risk adjusted returns for investors. The fund will take advantage of recent selling pressure and high levels of dispersion. Cairn Capital believes that it should be possible for the fund to return 15-25% annualised returns with the potential for even greater returns within the first year.
Having successfully managed pension fund assets within this strategy in segregated accounts since 2009, Cairn Capital is of the view that the time is now ripe for capturing the upside in this part of the credit markets.
Senior Portfolio Manager, Philippe Kellerhals (pictured), says: "We think that the asset class offers exciting opportunities longer term, but with particular value over the next 12 months. The market is under incredible stress at this point which is providing excellent entry points to certain assets that we think are mispriced, even under selected sovereign default and recessionary scenarios. Many of these assets are fundamentally sound but oversold."
The fund will be managed by Philippe Kellerhals who is supported by financials analyst, Folkert Jan van de Veer.
Andrew Jackson, Cairn Capital’s Chief Investment Officer, says: "Even though our approach at Cairn Capital tends to be long-short, this is one of those rare opportunities where outright value is extremely compelling."
