Canyon Value Realization Fund posted a return of 6.26 percent in the first quarter and has already added another +0.74 percent through April 12. The value-oriented multi-strategy fund was able to outperform all relevant benchmark indices for each asset class. The portfolio managers of Canyon Capital Advisors, Mitchell Julis and Joshua Friedman are specialists in bank debt and distressed securities.
However, the firm invests in RMBS, equities and other strategies as well. Canyon’s investments in Bonds was up 11.5 percent in the first quarter, exceeding the 2.9 percent return on the comparable Barclays US Corporate High Yield Index. The fund returned 7.1 percent on its debt portfolio in Q1, out pacing the 2.4 percent return on Credit Suisse Leveraged Loan Index. In equities, the value fund gained +13.3 percent, again outperforming the benchmark index, S&P 500, which was up +10.6 percent in the same period.
The firm is expanding its invested capital on the European turf which was increased by 75 percent in the last two quarters, adding another $600 million to its existing European portfolio. In that region, Canyon posted a gross return of 22 percent in 2012 and has already gained +10 percent in the first quarter of 2013. Some of Canyon’s recent investments in the eurozone include positions in distressed debt of a travel and tourism company in the UK, which is now toned down significantly after the company started showing signs of revcovery.
We are convinced Canyon is talking about Thomas Cook Group plc (LON:TCG). The shares are up a whopping 542 percent in the period between Oct 1 2012 to end of March 2013, which should have generated a high payday on Canyon’s debt investment. On the other hand, a couple of hedge funds have short positions in Thomas Cook Group plc (LON:TCG)’s equity and they must be bleeding.
Canyon has existing positions in the debt of a European shipping company, a Irish hotel chain and a Spanish real estate conglomerate. The fund expects increased asset sales by European banks and other big companies, which presents Canyon with a visible opportunity to invest in the distressed securities. Canyon sees itself making huge gains from Europe in the coming months.
Canyon Value Oriented Fund’s fixed income portfolio makes up 89 percent of the fund’s invested assets. The fund is unlevered with 6 percent in cash. The fund has moved away from the high yield bond market as it has become less attractive and takes pride in showing lesser and lesser correlation to the returns on Barclays on HY Index. Canyon Capital Advisors manages $19 billion in assets under management and has generated a return of 19 percent annually since 2009.