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Posted inAbsolute ReturnFixed Income

Fund Favourites – Omar Gadsby

Don’t touch energy

Contrasting with the average US corporate high yield bond, which is down 2.5% in dollar terms over the past month, the Muzinich Long Short Credit Yield Fund has avoided any losses. The key to this was indeed that the fund has been staying clear from the energy sector. The sector comprises about 15-20% of the US high yield bond universe, but it doesn’t figure in the fund’s top-10 sectors.

Though the fund is heavily tilted towards high yield bonds, it must be noted that, strictly spoken, it is an unconstrained long/short bond fund, as it has significant exposure to investment grade (sovereign) bonds as well. This helps to keep annual volatility (2.4 over a 3-year period) and maximum drawdown (-0.91%) exceptionally low, while the 3-year total return of 20.8% have outpaced those of the Barclays US Corporate High Yield Index by quite a margin.

What about the costs?

Possibly the only downside of the fund, which is available in USD, EUR and CHF share classes and has a current size of $1.3bn, is that it’s consistent in its hedge fund-like qualities. On top of an ongoing charge of 1.17%, it charges a 10% performance fee. Of course you can try to negotiate, but this might not be as easy as with the average hedge fund, which has been lagging most UCITS funds over the past three years, even excluding fees… 

Part of the Mark Allen Group.