Axiom Freezes $120 Million Credit Fund on Valuation Concerns

(Bloomberg) -- Axiom Alternative Investments suspended a 110 million euro ($120 million) credit fund, citing difficulties valuing its underlying holdings.

The Axiom Credit Opportunities fund uses leverage and invests mainly in credit default swaps. But the CDS market is dislocated right now, making it harder to price the assets, according to Jerome Legras, managing partner and head of research at the long-short fund.

Markets have been thrown into turmoil, sparked by the global spread of coronavirus. The deadly virus, known as Covid-19, has claimed thousands of lives and led to governments around the world locking down their citizens in an effort to contain its spread.

The firm had subscription orders and some redemption requests but wasn’t sure about executing those orders based on the current net asset value of the fund.

“We decided to suspend outflows and inflows until we can be sure that net asset values are calculated in a consistent way in order to protect holders,” Legras said in a telephone interview.

Legras said Axiom hasn’t decided when the restrictions will be lifted. The fund has returned about 13% since launch in December 2018.

Axiom, which manages about 1.4 billion euros overall, received a ‘large’ amount of requests from investors trying to buy into the fund, Legras said. These orders amounted to more than 30% of its assets, or some 33 million euros, he said.

Credit-default swaps are contracts based on bonds and loans that are used to speculate on a borrower’s ability to repay debt or to hedge against losses on the debt.

The fund invests in tranches of CDS indexes which can be difficult to trade, especially in times of market dislocation.

©2020 Bloomberg L.P.