Corporate credit has endured a difficult period of late due to rising interest rates and deteriorating corporate fundamentals. Over the past 3 years to 30^th September 2023, the Bloomberg Global Credit Aggregate registered a total return of -16.0%.

Alpha can be extracted from credit in several ways, such as credit mutual funds, credit hedge funds and private credit funds. These investment options derive the bulk of their returns from two factors: carry and price appreciation. It is the quality of credit selection which typically determines the level of alpha vs. a simple benchmark.

Most credit hedge funds run net long and offer little value in a credit downturn. For example, in 2022, 81% of the 1,628 Fixed Income funds in the Eurekahedge database posted negative returns. The average drawdown for the year was -6.8%, with 35% of this universe falling over -10%.

Coleman’s Fixed Income Fund, which employs a global variable bias credit long/short strategy offers a different approach to credit investing. Its willingness to short single name credit and run net short in addition to net long offers additional sources of alpha and a return profile highly differentiated to the vast majority of credit investments available today.

The table below shows the performance of the fund since inception vs. key long only and credit hedge fund benchmarks as well as the correlation over this timeframe. While the fund has generated attractive absolute returns, it has delivered these returns totally uncorrelated to credit markets and other credit hedge funds, making it an excellent portfolio diversifier.

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If you would like to learn more about the fund, please contact: enquiries@coleman.capital

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