Brigade Capital Said to Return 23% in 2016 as Credit Roars Backby
Main hedge fund at Morgan’s firm rebounds from 2015 decline
Firm’s newest pool, focusing on energy, surged 34% last year
Brigade Capital Management’s main hedge fund returned almost 23 percent last year as the market for corporate credit snapped back from a turbulent 2015, according to a person with knowledge of the returns.
The firm’s $2.6 billion Brigade Leveraged Capital Structures Fund, a long-short fund, gained on bets involving the debt of iHeartMedia Inc., the radio broadcaster that’s been embroiled in multiple fights with creditors, Toys “R” Us Inc., BMC Software Inc. and Caesars Entertainment Corp., according to the person, who wasn’t authorized to speak publicly about the returns. Brigade’s $2.3 billion opportunistic vehicle also gained nearly 23 percent on similar investments, plus those involving Sprint Corp. and Advanced Micro Devices Inc.
Paul Scarpetta, a spokesman for the New York-based firm at Sard Verbinnen & Co., declined to comment.
Brigade’s returns suffered in 2015 as a broad decline in corporate credit dragged down prices for high-yield bonds and loans, forcing some funds focusing on the strategy to close and others to lose assets as liquidity froze up and investors fled. Brigade’s main pool fell more than 10 percent that year, the person said.
Managing partner Don Morgan said last February that he saw opportunities returning in the weakest areas of the high-yield bond market, where many of his funds concentrate their investments. Returns from speculative-grade bonds began rebounding that month, eventually generating more than 17 percent for junk-debt investors in 2016, according to Bank of America Merrill Lynch index data.
Brigade’s newest pool, which invests in energy companies, returned the most of its five hedge-fund vehicles, generating about 34 percent last year, according to the person. The roughly $420 million fund’s most lucrative position was in Consol Energy Inc., and it also invested in oil and gas explorer Jupiter Resources Inc. and pipeline operator Williams Cos.
The firm has more than $18 billion in assets under management, including its collateralized-loan investment business.
|Fund Name||2016 Return||Assets (approx.)|
|Brigade Leveraged Capital Structures Fund||22.8%||$2.6 billion|
|Brigade Credit Fund II Ltd.||22.9%||$2.3 billion|
|Brigade Structured Credit Fund||26%||$630 million|
|Brigade Energy Fund||34.2%||$420 million|
|Brigade Distressed Value Master Fund||33.4%||$210 million|