“We understand the rationale behind the decision to wind up COF, but are more disappointed about the EYF decision.”
The fund’s strategy invests mainly in New Zealand floating rate assets, including asset-backed securities, corporate notes, and preference shares.
“While ING has not been afraid to delve into lowly-rated credit securities, the firm had always stated that it intended to maintain investment-grade status overall – so Enhanced Yield should have been a reasonable long-term solution.”
“The deteriorating credit environment, rush towards government-guaranteed investments, and collateral damage to Enhanced Yield's reputation by its association with Credit Opportunities has seen Enhanced Yield's fund size almost halve to $27 million. The business case for leaving such a strategy open is also now significantly less attractive.”
Enhanced Yield has around 30% of its investments in private loans, which ING has indicated it will attempt to sell on to a third party without the need to do so at distressed prices. The outcome for Credit Opportunities will be very different. The illiquid nature of the majority of its holdings is likely to mean that it will take some time before investors receive any return of their capital.
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