Winners rationale

Pictet Asset Management’s Europe-focused Alt-Distressed & Special Situations strategy speaks to a time when the economic gloom caused by the COVID-19 pandemic has exposed more opportunities for buying or shorting company debt to generate attractive uncorrelated returns — a priority for investors keen to reduce portfolio risk and navigate a lower-for-longer yield environment.

But identifying and capturing said opportunities is another matter altogether. And Pictet Asset Management, with this strategy, has ensured that it has in place the right team with the right investment approach to uncover those opportunities across various points of the business cycle.

What makes Pictet Alt-Distressed & Special Situations stands out from its peers is its relatively liquid format with 12-month lockup and quarterly redemptions thereafter, and an investment approach that prioritises the active management of liquidity, high conviction, a balanced portfolio with meaningful short book, and a focus on high IRR trades with high risk/reward ratios. This winning strategy uses an absolute return long/short credit approach that invests in corporate and government bonds, convertibles, loans, credit derivatives, equities (listed and post-reorganisation) and equity options.

The strategy targets net absolute returns across the cycle, with a low correlation to traditional asset classes, and focuses primarily on larger capital structures and more liquid securities, where the majority of attention and trades are focused on Europe — although the strategy can also opportunistically target exposures outside of Europe, predominantly in the US.

The team behind the strategy, having worked together for close to a decade, is highly experienced and specialised along sectoral lines with over 60 years of combined European distressed experience. It has an enviable track record: the fund delivered 37% gross performance in the first full year since its launch in late December 2019.

In terms of approach, the investment team takes a strict bottom-up and conviction-led approach and works largely independently of one-another with the intent of avoiding correlation between sector specialism and allocation of risk within the strategy. Underpinning the process are proprietary models and databases of companies developed over a period of years. In other words, while it can and does draw on the resources of Pictet Asset Management including the Pictet Strategy Unit and Economic Analysis team, the team are fundamental and bottom-up focused.

Among the raft of recent launches accessible to Asia’s investors and reviewed by the Judging Panel, Pictet Asset Management’s Pictet Alt-Distressed & Special Situations stood out for its sheer relevance from a portfolio perspective, the calibre of the investments team, and the quality and differentiation of the strategy itself. Pictet Asset Management is the deserved winner of Asian Private Banker’s Best New Fund award for 2021.