Jon Close for Credit Flux August 2016.

 

Ostrich Hunter

Vaskevitch: Ostrich Hunter

 

Credit hedge fund managers are look­ing for “technological disruption” as a source of blockbuster returns for their investors. For the most part, the technology industry has been the domain of private equity and venture capital firms because tech companies tend to be asset light and rarely need debt. However, some credit man­agers have overcome this by looking at how tech­nology is affecting various other markets.

Former Serone Capital Management partner Alex Vaskevitch, for example, launched his long-short credit fund manager ALVA Capital last year. He says that ALVA is eyeing sectors that are undergoing secu­lar decline by investing in companies that can adapt to new business models, while also going short com­panies that fail to acclimatise.

“I used to manage a high yield portfolio and I noticed that all of my losses came from companies that were in industries that were being disrupted,” says Vaskev­itch. “The companies all thought they had a management team which could solve the problem and that the disruption was over-hyped.”

London-based Vaskevitch indicates that his new fund will take advantage of such situations by shorting the debt of firms with managers that employ an “ostrich strategy” by ignoring warning signs and focusing on current cash flow models.

DVD rental company Blockbuster, which failed to adapt to the new wave of technology and was eventu­ally overtaken by Netflix, is a prime example. “The debt of these companies is often dislocated as investors focus on what appear to be decent revenue numbers in the short term,” adds Vaskevitch.

First published August 2016 in the Credit Flux monthly magazine here and also on the Credit Flux website.

Alva Capital

Alva Capital

Alexander started his career in distressed debt at BNP Paribas and then assisted in creating ABN AMRO’s high yield platform before moving to hedge fund LNG Capital in 2008, where his high-yield bond fund outperformed the market by 15%. A year later, he joined $1bn hedge fund manager BCM, where he was responsible for high yield investments and contributed to the firm’s overall fixed income strategy. Following that, he moved to Serone Capital Management where he was a Partner and responsible for running the “Zenith High-Yield Fund”.