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Mariner’s Bold Bet Paid Off in 2018

Anticipating upheaval in the fixed income markets, Mariner was proved right in selling down credit in its flagship hedge fund.

In December 2017, Mariner Investment Group chief investment officer Bill Michaelcheck made the contrarian call of moving its flagship multistrategy hedge fund out of credit and into rates.

Apparently, the bet paid off: The firm's fixed-income relative-value hedge fund returned 9.88 percent in 2018, according to eVestment and other institutional databases. The fund notched a 2.6 percent gain in January and now boasts a trailing 12-month return of 10.19 percent. A Mariner spokesperson declined to comment. 

Last year, many credit funds struggled amid one of the first periods of rising interest rates in a decade. The Bloomberg Barclays Aggregate Index returned 0.01 percent in 2018. 

At the time Michaelcheck made his investment shift, competitors were bemoaning a potential market correction — but, flush with cash, many were still big buyers of credit. It was a big move for Mariner, which had been loading up on the asset class since the lows of 2008 and 2009.

“We’ve been buyers of credit since the financial crisis,” Michaelcheck told Institutional Investor at the time. “Now it’s time to go home.”

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Mariner flipped the fund from holding about 60 percent in credit instruments and 10 percent in rates to the opposite. Michaelcheck, who founded Mariner in 1992 after running fixed income trading at Bear Stearns for 15 years, pivoted the multistrategy fund to rates, namely government bonds and sovereign debt.

The firm continued to hold significant credit assets in its illiquid credit vehicles, however, including a regulatory capital relief strategy focused on infrastructure and its collateralized loan obligation business.

Mariner oversees relative-value investments in asset classes and strategies ranging from from government bonds and agency mortgage-backed securities to niche credit funds.

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