ECM Asset Management Ltd., a money manager owned by Wells Fargo & Co. (WFC:US), started its first fund that will buy both senior secured loans and high-yield bonds.
The investment vehicle, with a 500-million euro ($628 million) target size, will focus on borrowers from northern non- peripheral European countries, including Germany, the U.K., and France, the London-based firm said in an e-mailed statement. Torben Ronberg, head of loans at ECM, will be the lead manager for the fund, along with Andre Mazzella.
ECM, which manages $9 billion, is looking to maximize returns for its investments in the high-yield fixed-income markets by combining loans and bonds in a single fund, as the sovereign credit crisis and reduced bank lending in Europe are forcing non investment-grade borrowers to offer higher yield for their debt.
“The shrinking CLO market and bank retreat from high-yield corporate lending is creating appealing opportunities for institutional investors,” said Ronberg in a telephone call. “In the current environment we don’t think we need to go to peripheral countries in Europe to achieve our target annual return of 6 to 8 percent for the fund.”
The premium investors demand above government debt to buy high-yield bonds in euros rose to a two-year high of 1,049 basis points in October, according to Bank of America Merrill Lynch’s Euro High Yield Index. The average bid price for leveraged loans in Europe rose 4.1 percent this year, compared with 3.2 percent increase in the U.S., according to data provider Markit Group Ltd. A basis point is 0.01 percentage point.
“This fund is conceived to offer the flexibility to trade relative value across senior secured loans and senior secured bonds in primary as well as secondary markets,” Ronberg said.
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