Credit Funds on the Rise

Following a credit sell-off in March, Axonic Capital is looking to make a comeback through raising nearly $1 billion.  Investors are looking to capitalize on undervalued assets with this fund.  The firm was a key player in the 2008 financial crisis through its role with mortgaged-backed securities.  With its nascent fund, Axonic hopes to invest in commercial and residential mortgage-backed securities.  This is largely in response to the Covid-19 related market volatility.  

Strategy

This practice is quickly becoming familiar within the hedge fund industry.  Other funds such as Baupost and TCI are looking to take advantage of this year’s market tumble.  The market has not been favorable to these funds in the macro scale, however.  Structured credit funds in particular have taken a large fall.  Additionally, Axonic’s Credit Opportunities fund was down 22 percent for the first half of this year.  The fund’s SBL fund — focusing on apartment buildings — is down 16 percent.  

Investors are expecting a spike in mortgage-backed securities and real assets, with the help of external stimulus funds.  Axonic will focus on buying bonds backed by apartments through partnerships with mortgage companies like Freddie Mac.  Axonic is a New York-based firm that currently possesses around $3.5 billion assets under management.