“As hybrids are sold into the market, retail investors tend to sell older hybrids (where some of the optionality creates additional uncertainty) in order to buy the newer issues. The result is that the market can oversell, creating opportunities for informed investors.”
Campbell Dawson, Elstree Hybrid management director, said: “We believe the hybrid market offers opportunities for active investors as it is inherently inefficient. It is dominated by retail investors who have a limited understanding of bank and insurer capital issues, and who under and overreact to issuer specific risks and equity market movements. We construct portfolios which seek to benefit from market opportunities and inefficiencies and pass these returns on to our investors”.
The ratings house also had a positive view on Australian private debt as an asset class, saying more domestic borrowers were now seeking funds from outside traditional banking sources.
“The market dynamics are supportive of attractive risk-adjusted loan pricing which presents an opportunity for a capital provider to earn excess returns,” chief executive Angela Ashton said.
“We do not believe the fundamentals of this market in Australia will deteriorate over the foreseeable future.”
Rob Hamer, portfolio manager at boutique firm Wentworth Williamson, said the fund was designed to provide risk-adjusted stable returns in the form of a monthly payment.
“Our value proposition focuses on specialised non-bank lenders and other opportunities where the provider has a right to win and where our clients are afforded strong first loss protection,” he said.
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