Queensland-based $1.6 billion industry fund BUSS(Q) has “dipped its toes” into two distressed opportunities funds, identifying flailing debt-ridden companies as a means of boosting performance according to chief executive David O’Sullivan.
The fund has awarded two $10 million mandates to US-based managers Siguler Guff and Quellos. Both mandates are for distressed opportunity funds. The $20 million exposure to distressed debt has been funded from BUSS(Q)’s international equities portfolio, which had spoken for 23 per cent of scheme assets. “Distressed debt is a bit like private equity in nature but it’s more focused in the credit space,” O’Sullivan said. “It sees buying opportunities in companies where the equity is gone – where they’re technically insolvent. [These funds] buy the debt at a high discount, so they own the liabilities, then they take control of the company and re-equitise it.” He said these initial mandates were kept small deliberately as BUSS(Q) was not wanting to go into distressed debt “in a big way, straight away” although it does see the sector as opportunistic at the moment, and a possible good performer if the rest of the international equities portfolio is struggling. “We think it might actually be negatively correlated to the rest of the international equities portfolio,” O’Sullivan said.
liabilities, distressed, they’re, “it, fund’s, buying, technically, these, insolvent, deliberately, discount, o’sullivan
Alternatives
The chief investment officer of the $150 billion industry super fund says that Hostplus’ portfolio will weather the ongoing downturn in software companies and that moves by a number of large private credit managers to gate their funds are a result of the asset class being offered to retail investors who should not have assumed the funds would be liquid enough to get money out when everybody else is trying to do the same.






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