Paris-headquartered investment firm IVO Capital Partners is planning to register its Ucits-compliant IVO Fixed Income fund in new European countries, InvestmentEurope can reveal.
The boutique, managing over $500m of assets, runs this global corporate bond fund in an unconstrained and contrarian way since April 2015, applying a strategy depicted as “bad countries good companies” by the management team of the firm.
Speaking to InvestmentEurope, Charlotte Vermer, responsible for institutional sales in Europe at IVO Capital Partners, says the fund invests where the team sees investors’ outflows, negative news flows and economic, political or sector stress.
She adds the fund’s opportunistic style makes investors associating it to an emerging market debt hard currency fund but as the “bad” countries always change from a period to another, it hence leads to a rebalancing of geographical areas invested in the fund.
“We try to benefit from the spill over effect of a country’s stress on local companies without being exposed to this stress. We exploit inefficiencies in the market. For instance, rating seems a quite bad proxy in these geographical areas, we therefore could end up investing in investment grade-like companies that are considered high yield on a strict rating point of view,” Vermer explains.
Sidney Oury, partner and co-founder with Michael Israel and Roland Vigne of IVO Capital Partners, highlights: “When a systemic shock occurs, we tend to first buy exporters since they will be amongst the least affected and even post potential record profits as the local currency may slump as well as high quality companies.
“Both types of firms are forced to issue debt at 6-7% because of the shock despite their investment grade profile. Hence we invest into them with a medium/long duration stance as we wait for the normalisation of the situation.
“In a second phase, when exporters’ spreads have tightened, we progressively buy more local and more cyclical companies and in the third phase, we invest in corporate events. We currently find ourselves in that part of the cycle. We are short duration today (2.4 on average) because we keep a defensive approach.”
Oury pinpoints that since inception, the strategy carries a Latin America bias but back in 2011-2012 when it was run at Merrill Lynch, IVO’s founding trio was among first investors in European PIGS (Portugal, Ireland, Greece, Spain) as spreads were about to contract and there were signs for them to go long duration in the corporate bond segment of these countries.
What is the team’s outlook for LatAm? “We monitor further political risk with forthcoming elections in Brazil. The economic outlook improves. The situation remains somewhat unbelievable since on the one hand, the election’s most popular candidate, former Brazilian president Lula, is in jail and on the other hand, the current government drives interesting reforms but lacks of popularity. That is why we are short duration in Brazil and our investments hold a micro-economy profile.
“Politics are rather not a topic regarding Argentina, we are currently trimming our Argentinian positions. We have low allocation to Mexico but we scrutinise a number of companies in the country. We are quite concerned about the outcome of this one-round election given it could see the victory of a far-left party and that could shed uncertainty on the gains and models of local exporters.”
Regarding the commercial trade spat between the US and Russia/China, the team has made a few opportunistic investments in Russian companies that were in the scope of the series of sanctions set by the US.
“We don’t believe this will turn into a greater fight but that will bring volatility providing therefore opportunities to invest in China governmental and corporate debt,” Oury tells InvestmentEurope.
IVO’s partner says the firm wanted to target institutional clients such as insurance companies and private banks from the very beginning but it first addressed qualified investors (family offices, private banks, asset managers) who were most likely to invest in its niche fund at an early stage.
“Since Charlotte Vermer joined us, we extended our focus on Benelux region and in Switzerland on top of France. We are reviewing our presence in Spain, which has been hitherto through third party marketers and we have discussions with potential partners in Italy. Another development step for us will further be the British market,” he points out.
Vermer adds: “We have established commercial presence In the Nordics, as a Swedish private bank will soon invest with us. We will further register the fund in Italy, the Netherlands, Germany and in the UK.”
Established in 2012, IVO Capital Partners is also involved in the area of litigation finance and has offices in Mexico and Sao Paulo in addition to its Paris headquarters.