COVID-19 has stalled the emergence of new credit fund investment strategies and has pushed managers to focus on their existing credit platform products, according to a new report from global law firm Ropes & Gray.
The report, “Challenges and Opportunities in Post-COVID-19 Credit Fund Platforms 2020” analyzes the responses of 100 senior-level executives at U.S.- and U.K.-based credit funds. To get a sense for how credit fund managers are shaping their investment strategies in light of the economic upheaval and uncertain market conditions brought about by COVID-19, executives were surveyed twice: prior to the introduction of lockdown restrictions and again in the midst of the pandemic.
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Early in 2020, 50% of managers stated they were considering launching new investment strategies. Six months later, only 20% were, reflecting a distinct shift away from pre-COVID-19 enthusiasm. 23% responded that they were closing less popular strategies, and in light of the COVID-19 pandemic, managers and investors alike are more focused on existing strategies.
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Commenting on the overall findings, Ropes & Gray asset management partner and head of the credit funds practice, Jessica O’Mary, says that despite fund managers’ concerns, credit funds have proven resilient: “There had been some concerns around systematic risk issues with these products, but by-and-large, the system held up pretty well.”
The survey also revealed a degree of bifurcation in terms of credit managers’ intentions. Strategies that provide downside protection against COVID-19 are deemed vital to 63% of respondents, but so are increased return opportunities to 73%.
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