Investcorp White Paper Examines Credit Market Landscape, Identifies Compelling Opportunities

21 Jun 2018

Bahrain, June 21, 2018 – Investcorp, a leading global provider and manager of alternative investments, today released “Opportunities in Credit,” its latest white paper examining six credit-related strategies that may help deliver value in today’s market environment. The co-authors of the paper are John Fraser, Head of Credit Management U.S.; Jonathan Feeney, Co-Head of Research, Alternative Investment Solutions; and, Gregory Berman, Co-Head of Research, Alternative Investment Solutions.

The white paper examines U.S. residential mortgages, callable legacy RMBS, distressed middle market credit, Italian non-performing loans, senior secured loans and collateralized loan obligations. When combined, Investcorp explains that these strategies offer investors a meaningful range of opportunities to help deliver returns in today’s credit environment.

“Despite the pressures put on markets by rising U.S. interest rates and narrowing credit spreads, certain credit strategies may present investors with potentially significant opportunities,” said John Fraser, Investcorp’s Head of Credit Management U.S. “At Investcorp, we’re focusing on strategies, such as senior secured loans and collateralized loan obligations, that may help deliver value to investors seeking to protect themselves from the impact that rising rates could have on more traditional fixed income assets.”

“Today, we are leveraging our knowledge and expertise in distressed credit to identify sophisticated hedge funds that are well-positioned to benefit from current imbalances in the industry,” said Jonathan Feeney, Co-Head of Research, Alternative Investment Solutions at Investcorp. “Within the mid-cap universe particularly, we’re seeing hedge funds discover opportunities for alpha by analyzing the complex corporate events impacting the life and capital structure of companies.”

Within the white paper, Investcorp describes how this group of credit-related sub-strategies may help generate returns by offering investors opportunities that lack significant market dependency. After recent credit spread compressions and repeated interest rate hikes from the U.S. Federal Reserve, these strategies may potentially provide attractive differentiated returns and margins of safety.

“Within the U.S. residential mortgage market, for example, we are seeing significant demand from underserved borrowers who are currently shut-out of the market,” said Greg Berman, Co-Head of Research, Alternative Investment Solutions at Investcorp. “In the decade since the Global Financial Crisis, regulatory changes and shifting investor appetite – combined with a new generation looking to buy homes – have led to a mortgage market that no longer serves the breadth of potential borrowers. As a result, we are seeing a mismatch between supply and demand in the market that creates substantial opportunities for alternative non-traditional lenders to fill the void.”

Investcorp introduced its Investcorp Credit Management (ICM) business last year, following the acquisition of 3i’s debt business in March 2017. Today, ICM has over $11 billion in assets under management and invests primarily in senior secured corporate debt issued by mid and large-cap corporates in Western Europe and the U.S.

Investcorp’s Alternative Investment Solutions (AIS) group launched in 1996 and currently has approximately $4.0 billion in total AUM across its customized multi-manager solutions, hedge fund partnerships, alternative risk premia and special opportunities portfolios, including assets managed by third party managers and assets subject to a non-discretionary advisory mandate where Investcorp receives fees calculated on the basis of AUM.

For more information, download the complete white paper here.