UK - Julius Baer has announced it will launch a new single manager convertible and high yield hedge fund on July 1.
The JB Convertible and High Yield Hedge Fund is the Swiss asset manager’s fourth single manager hedge fund and will focus on convertibles and corporate bonds rated BB or below, and hedged with credit protection, outright shorts, equity and interest rate positions.
The firm has poached Henry Hale from JP Morgan to run the convertibles with existing JB high yield specialists Greg Hopper, Mary Gottshall and Johannes Wagner.
JB said the fund was aiming at LIBOR plus 10% per annum with expected volatility of 7% per annum and a VaR limit of 9% on a monthly basis with a 97.5% confidence level. It is expected to launch with about US$120m.
“Traditional convertible arbitrage has struggled as volatility has declined, but we have generated consistent value by trading global convertibles mainly against credit default swaps (CDS), under, closely or over-hedging the credit portion on a discretionary basis, leaving some equity market exposure,” said Tim Haywood, CIO at Julius Baer Investments.
“We have got to a stage in the market which is quite appealing and implied volatilities, as a measure of value of convertibles, are now at levels that we have not seen for a few years.”
Haywood said JB was looking to expand its exposure to the traditional convertible arbitrage sector above the convertibles vs credit default swap strategies with its enlarged convertible team.
The fund will be listed in Dublin, domiciled in the Cayman and the prime broker is Citigroup. The estimated initial capacity of the strategy will be about US$500m.
Management fees are 1.75% with a performance fee of 20% of new profits above accreted LIBOR rate. Currency classes will be US dollars, Euro, Sterling, Swiss Franc and Yen.
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