Forward Management has launched the Forward Global Credit Long/Short Fund offering a (hedge-style) long/short strategy focused on the corporate debt sector. The new fund complements the long-only Forward EM Corporate Debt Fund (FFXRX) introduced in May, 2011. Both funds are managed by SW Asset Management, LLC, a Newport Beach, CA-based asset manager that specialises in global credit markets.
"Our new long/short fund is designed for investors who want broad exposure to debt opportunities around the world, but are also concerned with volatility and interest-rate risks," says J Alan Reid, CEO of Forward Management. Reid said the new fund has some bias to emerging markets, given their generally higher economic growth rates, but typically invests broadly in at least 10 countries at any one time. The Strategy can also potentially hedge against sovereign defaults and extreme credit market downturns. At least 40% of Fund assets must be invested in issuers based outside the US.
David Hinman, co-founder and chief investment officer of SW Asset Management as well as co-portfolio manager for the new Global Credit fund, says that many investors underestimate the potential of investing long and short in global corporate debt. "We believe that low interest rates and high leverage in the credit markets of the developed world add up to an excellent environment for the Fund.” He adds that the Fund could benefit from debt opportunities in the emerging world as well as the inevitable restructuring of debt in the developed world.
Hinman also noted that non-US corporate debt is a strong portfolio diversifier, providing exposure to growing companies that often cannot yet be tapped through public equity markets since the issuers are private. "A good number of the companies we follow are privately- or government-owned enterprises, and in our estimation they are not going public yet because they expect to be valued much more highly in the future," he says.
The Forward Global Credit Long/Short Fund, which launched 1 October, 2011, is offered in Investor Class, Institutional Class, Class C, and Class M shares.
With this latest fund launch, Forward now offers a total of 11 alternative strategies packaged as mutual funds. These include six long/short funds in a variety of categories: commodities, multi-sector bonds, real estate and tactical allocation.
"We believe that investors today need a substantially expanded toolkit to cope with high volatility, economic uncertainty and generally lower returns," says Reid. "Long-only strategies certainly have their place, and we offer a variety of them. But in our view, if you limit yourself to the traditional style boxes and a long-only approach, it’s much more difficult to manage risks and get ahead in the long run. We’re convinced that a tilt toward alternative investing is the direction of the future."