Hildene Credit Funds Post Returns Over 15% on Banks, Consumers
(Bloomberg) -- Two structured credit hedge funds run by Hildene Capital Management saw double-digit gains in 2021 as wagers on bonds backed by bank collateral, leveraged loans and consumer debt paid off, according to a person with knowledge of the matter.
The $1.8 billion Hildene Opportunities Fund, which invests primarily in a type of legacy debt issued by banks and repackaged into collateralized debt obligations known as TruPS CDOs, gained a net 16% last year, helped by liquidations of the securities, the person said.
Hildene’s Opportunities Fund II, which has around $700 million of assets, gained 24% last year, according to the person. The fund, which invests across a broader range of structured credit, benefited from wagers on collateralized loan obligation equity and gains in asset-backed securities tied to consumer loans.
The funds benchmark their performance off a high-yield bond index. Asset-backed security hedge funds last year returned an average of about 5.7%, according to Hedge Fund Research Inc.
The Hildene Opportunities Fund also profited from a recovery in TruPS CDO prices, with some lower-rated slices of the securities rallying more than 20% last year. Higher rated tranches of the debt also jumped by double digits, the person said.
A representative for Hildene declined to comment.
In the Hildene Opportunities Fund II, the firm sought to take advantage of pricing differences between newly issued bonds backed by consumer debt and those trading in the secondary market. Bets on select corporate debt and agency commercial mortgage backed-securities also paid off.
Structured credit funds including Hildene suffered in the early days of the pandemic, but many managed to recover after extraordinary fiscal and monetary policy helped consumers and companies stay on top of their debts. The Stamford, Connecticut-based firm manages about $12.5 billion and is run by co-Chief Investment Officers Brett Jefferson and Dushyant Mehra.
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