RWC offers investors two days to exploit distressed convertibles

RWC Investors will only open its new distressed convertibles fund for two days to allow investors the best chance of taking advantage of the 'significant opportunity' in the asset class.

The RWC Distressed Convertibles fund, which is run by Lee Manzi and Miles Geldard, will be open to investors on the 12 and 27 February.   

RWC head of sales, Dan Mannix, said the limited offer is designed to ensure investors gain maximum benefit from any reduction in spreads as liquidity returns to the market.

The measured stance is in response to liquidity problems in the convertibles market caused by highly leveraged hedge funds being forced to unwind their positions in the asset class.

Mannix told Citywire the firm had already received around $70 million (£50 million) worth of pipeline interest from pension funds and private banks mainly based in the UK and Switzerland.

Those who invest will be locked into the fund for two years to prevent a mismatch between liquidity of the underlying investments and clients monies. If liquidity returns to the market before the two years is up, investors could receive their cash back if the fund has met its investment target.  

Mannix believes the forced selling of convertibles has created a unique opportunity. 'Investors who have cash to lock up for two years have a great opportunity. The yield to maturity on the model portfolio is as high as 35% per annum, although this assumes no defaults.'

The fund is a higher octane version of RWC's existing Global Convertibles fund, which is also run by Manzi and Geldard. According to Mannix, the fund has been taking in $100 million a month in each of the last three months. Its more conservative nature means it does not move into the illiquid parts of the convertibles market.

'We are launching the distressed convertibles fund because there is a significant opportunity in the illiquid high yield area of the asset class and it would not be prudent to exploit this on our existing daily dealing fund.'

The fund, which is domiciled in the Cayman Islands, will be denominated in dollars and sterling and have two share classes, one with a 10% performance fee and a second charging 25% performance fee, subject to a hurdle rate of 10% per annum. Both classes are subject to an annual fee of 1%.