Opportunistic Credit?
Can anyone provide more insight on these types of strategies? Is it just a fancy name for long/short credit, or is it more complex than that? What is the typical split between IG/HY/Distressed?
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There’s an old saying that goes: “ask 10 investors what opportunistic credit is, and you’ll get 11 different answers” okay actually I just made that up, but it’s true. That term would be used for any number of strategies and seems to have been tacked on to nearly every COVID/ post COVID credit fund around as a marketing ploy. As a very loose guideline, it usually has something to do with some sort of market dislocation, hence them popping up post covid, thereby creating an “opportunity” (hence the name). As for ig/hy/distressed, it could vary but I would say it would mostly occur in the middle bucket. If it was all distressed, it would simply be a distressed strategy. If it was all IG, I can’t imagine there would be much of an opportunity. I see a lot of hy and leveraged loans but could include IG and distressed where appropriate. Another thing I see if more niche opportunities, like real estate construction bridge loans, unfounded revolver plays, credit card securitizations, aircraft stuff. Dipping into the specialty finance zone. Long story short is it’s wide ranging.
Thanks for the reply, super interesting and helpful. Any more insight on how much shorting they do? I assume its not market neutral but more of a long bias with some shorts to fill in some gaps? I'm currently in HY/LL in the long only side, would I be able to step into one of those seats from here? Any funds to point out for being top-notch?
What I've seen so far is that they don't short a lot. Just a lot of going long on private debt and even public debt but probably only when we have a 2020 or 1929 type meltdown or the returns aren't worth it. Anything else like real estate or aircraft securitization is sorta special sits to me.
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