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| 21 June, 2018

Investcorp outlines key credit-related strategies

Investcorp introduced its Investcorp Credit Management (ICM) business, following the acquisition of 3i’s debt business in March last year.

A front view of Investcorp headquarter.

A front view of Investcorp headquarter.

Bahrain-based Investcorp, a leading global provider and manager of alternative investments, today (June 21) 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 US; Jonathan Feeney, Co-Head of Research, Alternative Investment Solutions; and Gregory Berman, Co-Head of Research, Alternative Investment Solutions.

The white paper examines US residential mortgages, callable legacy RMBS, distressed middle market credit, Italian non-performing loans, senior secured loans and collateralised 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 US interest rates and narrowing credit spreads, certain credit strategies may present investors with potentially significant opportunities,” said Fraser in the white paper.

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“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,” he stated.

Feeney said: "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."

“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,” he stated.

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 US 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 Berman.

"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," he added.

Investcorp introduced its Investcorp Credit Management (ICM) business, following the acquisition of 3i’s debt business in March last year.

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 US.-TradeArabia News Service

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