Credit hedge fund managers also see strong investment possibilities emerging in 2015, although their geographic and debt structure focus varies widely.
Whitebox Advisors LLC's Paul Twitchell, partner and global head of event strategies, is bullish on U.S. fixed income relative to the rest of the world. The Minneapolis-based firm has investments in both U.S. structured products and “some really hairy credit, much further down into the credit structure,” Mr. Twitchell said.
“We like volatility and we like distressed debt. We see a lot of opportunity in energy-related distressed debt,” Mr. Twitchell said, adding that energy companies could find it hard to find financing from traditional channels.
“But although it's not an easy trade — you have to have the stomach for it — supplying secured debt to energy companies at a certain price could help us generate good returns,” Mr. Twitchell said.
Whitebox managed $4.3 billion in multistrategy and credit hedge funds as of Oct. 31.
Los Angeles-based Canyon Partners LLC is judiciously “laying our bets” on European real estate-backed loans, adding to the $4 billion it already has invested in the U.K., Ireland and Germany, said Joshua S. Friedman, founding partner, co-chairman and co-CEO.
Because of very tight liquidity across global markets, but especially among European central banks, Mr. Friedman said “this is a competitive market among just a few private equity and hedge fund managers.”
Canyon Partners managed $24 billion as of Dec. 1 in hedge funds and other alternative investment strategies.
SEER Capital Management LP, New York, is focused on “the re-emergence of the subprime mortgage market,” said Philip N. Weingord, managing partner and CEO.
SEER portfolio managers are slowly building a portfolio of newly originated, non-agency, non-qualified mortgages that U.S. banks are allowed to provide to low-income or credit-impaired buyers but are loath to do so after the problems they experienced after the financial crisis.
Less than $1 billion of non-QM loans were originated in 2014, but Mr. Weingord estimated that the market could grow, albeit slowly, to as much as $150 billion over the next several years. Eventually, SEER will securitize the portfolio and sell the bonds to institutional investors, he said.
SEER managed $2.1 billion in credit strategies as of Dec. 1.
Like SEER Capital, long/short equity manager Highline Capital Management LLC, New York, also is focused on the U.S. market, with a view that the “biggest opportunities lie in companies or sectors that are evolving because they are complicated,” said Jacob W. Doft, CEO and portfolio manager.
“The end of QE in the U.S. will bring fixed-income volatility back to normal and equities also will resume the old normal. U.S. equities are more likely to outperform those of other countries because investor focus will be on fundamentals,” Mr. Doft said.
Highline is looking to very low-end consumer retail companies for “the greatest area of growth,” as the “shocking decline in oil prices and job growth” will help even out growth of the U.S. economy and put more money in the hands of low-income shoppers.
Highline managed $2.5 billion as of Dec. 1.
Eric M. Mindich, CEO of New York-based multistrategy hedge fund manager Eton Park Capital Management LP, is focused on international markets, especially Asian markets and particularly Japan. Mr. Mindich said he thinks there is so much opportunity in Japan's huge stock market now that the firm is more likely to be investing on the long side rather than the short.
“We're more optimistic about China, more contrarian, than many other investors. Valuations are very low there, and it's a good place for long/short equity investments. The big downward movement in oil prices is very significant for Chinese and Japanese companies,” Mr. Mindich said.
Eton Park managed $9 billion as of Dec. 1.