(Bloomberg) -- London-based hedge fund Cheyne Capital’s total return credit fund lost almost a quarter of its last month as debt markets convulsed over the impact of the deadly coronavirus pandemic.
The fund referred to as TRCF December 2024 lost 24.7% on top of a 5.3% decline in February, according to an investor letter seen by Bloomberg News. It mainly focuses on investment-grade companies which are less likely to default on their debts and includes bets using credit derivatives.
Lockdowns imposed by governments to stall the spread of the coronavirus have triggered a sharp sell-off in credit markets as investors weigh the economic impact of such measures. Even investment-grade borrowers are feeling the heat with the average cost of credit insurance on companies in the region rising to the highest since 2012.
“The firm remains confident in the underlying strength of investment grade credit and that, with its lack of exposure to the most at-risk sectors, the fund continues to be well-positioned to avoid defaults and generate target returns,” a spokeswoman for Cheyne said in an e-mailed statement. She declined to comment on the specific contents of the letter.
Risk of defaults in investment-grade debt is “materially mitigated” by the access companies have to conventional liquidity and stimulus programs from central banks and governments, the spokeswoman said. Cheyne manages about $7 billion in assets.
Investment-grade bonds are faring better than lower-rated credit as the Federal Reserve, European Central Bank and Bank of England buy up high-grade debt as part of efforts to boost markets.
Less than 10% of the Cheyne fund’s portfolio is exposed to high-yield borrowers and it’s highly diversified with approximately 150 names, according to the document sent to investors, which didn’t give details of the fund’s size.
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