Absalon Capital is a long only, employee-owned investment manager based in Copenhagen, Denmark. The firm was established over 30 years ago and currently manages €17bn mainly in fixed income. We manage two credit strategies – Global High Yield and Emerging Market Corporate Debt (hard currency).
Over the past 15 years we have invested across global credit markets with a unique value focused approach for both US and European institutional investors. While value investing is well understood in equity markets, value investing in credit markets is uncommon. It requires an unconstrained, conviction approach reflecting the fact that as an investing style, it is subject to capacity constraints.
Larger managers and smart beta strategies often struggle to deliver a genuinely value focused approach given the nuances of the credit market (illiquidity, complexity, trading costs etc).
The origins of our approach are firmly based on the work carried out by Eugene Farma and Kenneth French as far back as 1992. In 2001 Professor Martin Gruber was the first to publish a research paper explaining rate spreads in corporate bonds.
The research highlighted the role and importance of value and size (systematic risk factors) in credit market returns. It clearly identified that a substantial part of the credit spread that was not accounted for by default risk or taxes was a premium for bearing systematic risk.
In 2006 we set out as a team to develop a value strategy to exploit the value and size factors (the best rewarded factors). Since then, we have witnessed a growing body of research which supports our view that the approach delivers better risk adjusted returns than a passive or an index-based approach.
Since the inception of our Global High Yield strategy in 2006 we have delivered an annualised excess return of 1.2%. In 2010 we launched our dedicated EM Corporate Debt strategy which since then has produced an annualised excess return of 2.5% net of fees.