Julius Baer is to launch a convertible arbitrage and high yield fund trading converts and credit def...
Julius Baer is to launch a convertible arbitrage and high yield fund trading converts and credit default swaps, with an element of equity hedging introduced.
If approved by the Board on 14 June, the fund will start trading on 1 July and be open to investors on 1 September.
Tim Haywood, head of fixed income and alternative investments at Julius Baer, said the Cayman-domiciled and Dublin-listed fund, to be called the Julius Baer Convertible and High Yield fund, would have the firm's Global Diversified Fixed Income (DFI) fund as its main seed investor, investing via no-fee units in the new vehicle to start it at between $100m-$120m.
DFI has already taken part in one such arrangement, investing $120m last November in no-fee units of Julius Baer Investments' Credit and Emerging Markets hedge fund, managed by Paul McNamara.
Haywood said traditional convertible arbitrage strategies had been "suffering for some time, but there are other ways of trading in convertibles which can be profitable.
"Just because it has been painful getting to this point it does not mean from here things are not attractive," he added.
"We have got to a stage in the market which is quite appealing and implied volatility as a measure of the expensiveness of convertibles are now at levels we have not seen for a few years."
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