Apollo Hedge Fund Jumps 6% on Well-Timed Shorts, High-Grade Debt

(Bloomberg) -- Apollo Global Management Inc.’s flagship credit hedge fund is scoring gains this year at a time when most of its rivals are nursing losses from the markets meltdown.

The $3 billion Apollo Credit Strategies Fund run by John Zito was up about 6% through the week ended April 9, according to people with knowledge of the matter. Apollo had been quickly amassing holdings in beaten-down investment-grade debt in March before its rally after the Federal Reserve started buying up those notes.

Zito’s fund made roughly $250 million in profits from its collective shorts that included wagers against the CMBX 6, a commercial mortgage-backed securities index focused on retail real estate, as well as energy companies and SoftBank Group Corp., two of the people said, asking not to be identified discussing non-public information.

The Apollo credit fund had entered March with a net-short portfolio and finished the quarter up about 4%, before scoring additional gains through the rally in April. It snapped up debt issued by companies including JPMorgan Chase & Co., Intel Corp. and Sysco Corp., one of the people said. A representative for Apollo declined to comment.

The coronavirus pandemic has brought economic activity to a standstill across major global economies and the ensuing chaos in U.S. markets has forced the Federal Reserve to take unprecedented steps to prevent a complete markets meltdown. Hedge funds, especially those in the credit space, have suffered this year with some even blocking redemptions from their investment pools.

Others who have shorted the CMBX 6 include activist shareholder Carl Icahn, whose stance has pitted him against the likes of Putnam Investments and AllianceBernstein.

London-based hedge fund Cheyne Capital’s total return credit fund lost almost a quarter of its value last month, while Canyon Partners was down about 20% heading into the end of March.

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