In January, credit hedge fund manager Phoenix Investment Adviser opened its JLP Institutional Credit Fund to outside investors. The strategy, which originally launched in 2011 with partner capital, aims to limit downside and volatility while generating an 8% return, according to Jeff Peskind, CIO of Phoenix.
Peskind told PLANADVISER, many plan sponsors have investments in the bond market, but with interest rates so low, they need a change. “Many investors are looking for yield and to generate returns in this low-interest rate environment without taking on equity, commodity or currency risk,” Peskind said. “It seems that most institutions need to have an 8% or higher rate of return to meet their actuarial assumptions.”
As the Federal Reserve continues to signal a no-yield environment that will last possibly until 2014, Peskind noted that even conservative investors realize they need yield to meet obligations.
The JLP Institutional Credit Fund typically invests in B or BB-rated bonds that are senior or secured. These corporate bonds are often of the same or similar companies to those included in Phoenix’s flagship JLP Credit Opportunity Fund.
“We are seeing interesting opportunities in energy companies, as well as gaming and casino companies,” Peskind said.
The fund is offering founders’ round terms until it reaches a $200 million threshold. Investors are being offered the strategy at 50 basis points with 10% of profits over time and quarterly liquidity. There is also no lockup, so investors can exit at any time.
Phoenix recently received a $40 million investment from a European institutional investor for their JLP Institutional Credit Fund, bringing that fund’s total assets to approximately $60 million and pushing the firm’s total assets under management to more than $500 million.