Fawaz Habel, a Hong Kong-based senior fund manager at Value Partners Group Ltd., which oversees $8.9 billion of assets, comments on the impact of the Standard & Poor’s downgrade of U.S. sovereign debt. Habel runs the $62 million Value Partners Credit Fund.
S&P on Aug. 5 lowered U.S.’s long-term sovereign credit rating one level to AA+ from AAA, keeping the outlook at “negative,” citing the political failure to reduce record deficits. Moody’s Investors Service and Fitch Ratings affirmed their AAA credit ratings for the U.S. on Aug. 2.
“I think fears over U.S. growth and European Monetary Union are driving markets and not much the U.S. downgrade. It was telegraphed well in advance and has no impact on money markets funds and repo since the short-term rating is unchanged. S&P’s timing is horrible and it is adding to global concerns.”
“For us, we have been focused on short-term debt for some time and we continue to add risk we consider cheap while shorting expensive bonds.”