Mark Attanasio’s Crescent Capital Group LP, known for investing in junk debt, is for the first time buying preferred shares at companies such as KKR Financial Holdings LLC (KFN) and Goldman Sachs Group Inc. in a search for higher yields.
Crescent, an $11 billion money management firm, bought into 7.375 percent preferred equity shares, the equivalent of BB- rated debt, that KKR offered Jan. 10, he said in an interview. He also purchased 5.95 percent stock that Goldman Sachs first issued Oct. 24.
“We’re looking for ways we can get above-market yield,” Attanasio said about investing in preferred equities. “Macro economic factors are very positive for equities.”
The move comes as corporate speculative-grade rated debt yields 6.5 percent, the lowest rate ever, according to the Bank of America (BAC) Merrill Lynch U.S. High Yield Master II index. Equities are more attractive than bonds rated CCC because yield on the debt does not provide enough compensation for the default risk, Attanasio, who owns Major League Baseball’s Milwaukee Brewers, told Erik Schatzker on Bloomberg Television’s “Market Makers.”
More investors are beginning to turn to stocks after withdrawing $375 billion from equity mutual funds since the financial crisis began in 2007, according to data compiled by EPFR Global. About $3.1 billion flowed into the funds during the week ended Jan. 9, the most since the Cambridge, Massachusetts- based research firm began tracking the industry in 2000.
Allied World Assurance Company Holdings AG (AWH), the insurer and reinsurer started by firms including American International Group Inc., agreed earlier this month to take a minority stake in Crescent Capital and invest $500 million in the asset manager’s funds. The Zug, Switzerland-based insurer will invest in assets including mezzanine debt, collateralized loans and high-yield bonds.
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