Axonic Capital, one of the hardest hit hedge funds in a major credit market sale in March, raised nearly $ 1 billion in new capital this year, suggesting that investors are seeking exposure to beaten assets they still believe offer value.
New York-based company known for sucking residential mortgage-backed securities at depressed prices after the 2008 financial crisis has raised most of the money since early April, two people familiar with the affair shortly after the markets bottomed out.
The money will be deployed in areas such as commercial and residential mortgage-backed securities, where the company sees opportunities in the wake of the falling market, people said.
Axonic declined to comment.
Other hedge funds such as DE Shaw, Baupost and TCI have been able to attract investors to new and existing funds in recent months. These entries show how some institutions saw the declines as buying opportunities – even via funds that suffered heavy losses during the period.
Several large structured credit funds, where corporate and consumer debt are pooled to support sales of new bonds and stocks, were squeezed during the market turmoil earlier this year. Structured credit was the main driver behind the loss of Sir Michael Hintze’s CQS Directional Opportunities fund, for example, which lost around $ 1.4 billion in late May.
Axonic’s Credit Opportunities fund, which has made gains of around 7 to 8% in each of the past three years, lost around 30% in March. It has since recovered, but has remained down about 22% for the first six months of the year, according to figures sent to investors.
Axonic’s Special Opportunities SBL fund, which focuses on the purchase of mortgage-backed bonds in apartment buildings, was down 16% over the year.
Much of the structured credit market has not experienced the type of rebound seen in stocks and bonds since the US Federal Reserve launched a series of stimulus packages in March. Lower rated debt tranches – more prone to corporate and consumer defaults – are among those still languishing.
But some investors are now betting that residential and commercial mortgage assets will benefit from a similar resurgence, supported by huge monetary and fiscal stimulus.
Axonic tends to buy the lowest-rated, apartment-backed bond tranches issued by government agencies such as Freddie Mac, according to someone familiar with its strategy.
A smaller, computer-managed fund managed by Axonic that is trying to find arbitrage opportunities in fixed income securities is up about 13% this year.
After the influx, Axonic manages around $ 3.5 billion in total.
