Time for a Reassessment of a Popular Hedge Fund Strategy

Executive Summary
  • Central bank financial repression has forced investors to come up with innovative ways to earn yield.  Into this hunt for safe yield was born the modern credit fund.

  • The modern credit fund attempts to generate alpha by exploiting a chronic mispricing of investment-grade corporate bonds.

  • The strategy is based on strong logic, but the dangers of leverage, combined with the late stage of the economic cycle offer cause for concern.

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