Hassan Jeraj; Investor Relations at Serone Capital Management Speaks on Panel at the Apex Capital Introduction Services Alternative Emerging Manager Breakfast Seminar
Apex Capital Introduction Services hosted an Alternative Emerging Manager breakfast with interesting contributions from both managers and investors.
Points of discussion for Serone:
-Risks and problems seemingly everywhere in market
-Global shocks causing correlations across markets
-Where do we see major risks to our strategy coming from?
-US vs European credit markets?
-Lot of noise at present; oil, bank stocks, Central Bank divergence, EM, Zika virus, Brexit, refugee crisis etc
-Our strategy is designed to perform in all environments
-Serone simplifies its risk profile down
-We take a top down view; currently positive on core European corporate risk, then express our view through structured credit securities
-Securities we buy give a very high level of diversity; by geography, vintage, sectors etc
-Then put on trades in a way that gives us multiple drivers of return e.g. some of our positions will perform better in a stressed environment despite being long credit
-Ultimately question for us is whether the underlying borrowers from our securities will repay their debts
-Given that these are firms that are issuing first lien, senior secured loans to core European corporates with typically manageable leverage ratios and a tailwind from the ECB QE we do not foresee a sharp increase in default rates in the near term
-US loans default rate ~2% at end of 2015
-We expect increase in 2016, even if commodity prices rise 20% from here
-Too much focus has been on commodities however, and we think there could be some surprises away from that
-US credit markets open to more aggressive LBOs and leverage for a longer period
-Low wage growth, consumers still talking time to spend windfall from lower input prices, disruption all likely to increase surprises
-European credit markets have been more conservative
-ECB QE also helping to provide additional support