Some credit hedge funds are making the best in the given circumstances, and one such fund is Canyon Balanced Fund, managed by Mitchell Julis and Joshua Friedman, which has gained 12.3% return in the last seven months. The flagship fund, Canyon Value Realization, has gained 9.65% after adding a 1.35% return in July.
Canyon July performance
In last month Canyon’s RMBS portfolio gained 1.6%, bond and loans were up 2%, whereas equity book was up almost 8%, with no considerable detraction in any of its positions in bonds, loans and equities. Some of its best performing positions have been in a media company that announced that it is buying several TV stations in July. We are guessing this is about Tribune Company (OTCMKTS:TRBAA) which got into a deal to buy 19 local stations in a $2.73 billion cash deal—it’s stock rose 11% in July. Canyon has a position in both the equity and debt of Tribune, both of which have been doing well since the company emerged from bankruptcy in December 2012. Canyon also did well in another unnamed media company after a positive Q2 earnings release.
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In bonds and loans portfolio, the fund was able to profit from the debt of a diversified U.S. media company, and the holding was increased as the company traded down in June.
Canyon’s unlevered portfolio
As of July, roughly 12% of the CVRF portfolio was in cash, as the fund got paid $65 million on one of its positions in loan of a U.K. hotel. Over the year, 9% of the portfolio has turned to cash. Canyon continues to see RMBS and European corporate credit as investment opportunities. As European banks cut down on their oversized balance sheets, which Canyon expects to continue through this year, there are more chances for hedge funds to jump in and fill the gap for buyers. Canyon has invested in the loans of a European shipping company—which one, we cannot say for sure but Canyon has an equity position in Greece based Diana Shipping Inc. (NYSE:DSX), which was bought in the last quarter.
Canyon also bought loans of a European bank that is undergoing restructuring.