The Schroder GAIA II NGA Turnaround is the first fund launched on Schroders’ Global Alternative Investor Access (GAIA) II platform, which is a liquid alternatives platform for externally managed strategies.
The Turnaround fund takes fundamentally-driven long and short positions in corporate credit and equity securities, mainly in North America
The GAIA II platform will sit alongside the existing GAIA platform, which offers investors access to hedge fund strategies in a regulated Ucits format.
Inefficiencies
The Turnaround fund will be externally managed by New Generation Advisors (NGA), which has a 26 year track record investing in distressed securities. The fund will offer clients a liquid alternative strategy that is uncorrelated to traditional equity and bond markets to provide portfolio diversification.
"Even if the next big wave of defaults is slow to arrive, distressed opportunities always exist."
Turnaround aims to capitalise on inefficiencies that exist in the distressed securities market due to lack of understanding of the bankruptcy process and maximise returns from bankruptcies, distressed companies and turnaround situations.
The fund is diversified across sector, capital structure and issuer, and focuses on the liquid end of the distressed market.
George Putnam III, founder of NGA, will manage Turnaround. Launched in 1990, NGA’s flagship strategy has more than $800m (£562m, €727m) in assets under management and has delivered an annualised net return of 11.1%.
The Schroder GAIA II NGA Turnaround is benchmark unconstrained and will target an annualised return of 8-12% net of fees with expected volatility of 10-12%.
Liquid alternatives
Eric Bertrand, director of GAIA platform, said: “We continue to see very strong demand for liquid alternative strategies, run be experienced managers with a proven track record over many cycles. This is an opportune time to be launching a distressed investment strategy to further widen the range of strategies across both GAIA platforms.”
Putnam said: “With a record level of low quality debt outstanding, we expect the supply of distressed bonds to increase in the coming quarters.
“However, even if the next big wave of defaults is slow to arrive, distressed opportunities always exist because, even in the best of times, some businesses manage to make mistakes, and we are well positioned to take advantage of these opportunities.”
Schroders now has seven funds on the GAIA platform, six managed by external hedge fund managers and one managed internally.
