Alma Platinum MidOcean Absolute Return Credit

Investment Objective

DB Platinum MidOcean Absolute Return Credit is an open-ended UCITS compliant fund that seeks capital appreciation by generating stable, absolute returns. with a relatively high Sharpe ratio and low drawdowns over the long term. To achieve this objective, the Strategy employs a long/short corporate credit approach focusing on US companies: the Fund primarily invests in liquid short-dated corporate bonds, with a core focus on callable securities and credit default swaps, the combination of relative value positions with outright long or short credit holdings will typically produce a low duration and diversified portfolio. The Strategy utilises fundamental analysis to seek alpha opportunities primarily in short duration callable bonds, particularly in the 'crossover seam' between high yield and investment grade. Portfolio construction is performed with strict constraints on sector and industry exposure and the portfolio seeks to be as close to credit risk and market risk neutrality as possible.

Latest Meeting Note

Meeting 25 Nov 2019

The research team met with MidOcean at a cap-intro conference. The MidOcean Absolute Return Credit fund employs a long/short corporate credit approach focusing on short-dated bonds of US companies, with a strong focus on callable securit... Read more

The research team met with MidOcean at a cap-intro conference. The MidOcean Absolute Return Credit fund employs a long/short corporate credit approach focusing on short-dated bonds of US companies, with a strong focus on callable securities. The portfolio comprises two core investment strategies that are enhanced by a tactical hedging overlay to construct a diversified, low duration market neutral profile. About 2/3 of total risk is allocated to ‘low volatility income’ strategies. This sub-strategy targets income-oriented trades (high carry, low duration risk, significant credit risk retention) and is directional in nature. In this regard, the team utilises fundamental analysis to seek alpha opportunities primarily in short duration callable bonds, particularly in the high yield sector (average rating is BB- or B+ if valuations are more compelling). The remainder of the portfolio comprises ‘relative value’ trades (positive carry, low net duration risk, modest credit risk retention). These include capital structure arbitrage opportunities and intra-industry pairs. This book is more opportunistic in nature and particularly active at times when prices dislocate from fundamentals. Finally, the manager runs a tactical hedging overlay to mitigate residual risks, focusing primarily on credit spread risk and interest rate risk, in order to bring the portfolio back to market neutrality. In doing so, the manager typically spends up to 15% of the fund’s long income to buy derivative protection (e.g. put spread on credit index CDS). The strategy ($750m in total assets) is managed by a three-member team structure led by Bryan Dunn and benefit from MidOcean’s broader investment infrastructure (12 senior analysts, 6 junior analysts, 4 traders). Gross exposure ranges from 150-300%, with the fund leveraging the long book (up to 200%) through Total Return Swaps. Portfolio turnover in dollar terms is 4/5x per year.

Performance

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC YTD
2019 0.6 0.1 0.5 0.9 0.4 1.0 0.6 0.0 0.4 0.1 0.3 0.4 0.6
2018 0.5 0.1 0.4 0.9 0.9 0.7 0.7 0.3 0.8 0.5 0.2 0.5 0.8

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Close Current Site Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.