Ninepoint Partners plans new debt fund

Ninepoint Partners LP is preparing to launch a new debt fund as early as June, aiming to tap into demand for investment products that offer yield and snap up bonds and loans made cheaper by the market sell-off.

The Toronto- based asset manager has a goal to raise about $500 million for a new liquid alternative mutual fund, adding to its $ 6.5 billion in assets under management, senior portfolio manager Mark Wisniewski said.

As investors grapple with violent market swings that started in February, sparked by fears over the coronavirus pandemic, Ninepoint says the new fund will keep leverage low, he said.

Liquid alternative mutual funds, which are designed to mimic hedge fund strategies, became more popular in the U. S. after the 2008 financial crisis as investors flocked to vehicles that promised returns with less volatility. Last year, the Canadian Securities Administrators ( CSA) changed regulations to clear the way for alternative mutual funds in Canada. These funds allow investors to take out money on a daily basis and are often more transparent than hedge funds.

Ninepoint’s new fund would invest in investment grade and high- yield bonds, depending on where the best

PROTECTION TO THE DOWNSIDE WHEN THINGS GET VOLATILE.

opportunities are, Wisniewski said. The fund would put as much as 10 per cent of assets in private credit and add credit default swaps to protect the portfolio against an environment like the current one, with a rising risk of defaults.

“This structure should provide us with a little bit of income, but also with some protection to the downside when things get volatile,” Wisniewski said, adding the goal is to generate returns between 5.5 per cent and 6.5 per cent.

Ninepoint is joining the wave of money managers raising capital to buy debt that has been hit during the market’s historic dive. In the U. S., Bardin Hill Investment Partners started a US$ 300 million credit fund. Other funds that have been raising money to buy bruised credit include Varde Partners and Highbridge Capital Management.

Ninepoint’s flagship fund, the Ninepoint Alternative Income Fund, is up about 0.5 per cent this year, according Wisniewski, though most of its mutual fund lineup has not performed as well.

Overall, this should be a good year for credit, he said. “People will reposition their money and just as what happened coming out of 2008, they should end up buying more of fixed income,” he said. “I’m pretty encouraged, although I think we still have a little bit of wood to chop here.”