At Rochford Capital, we specialise in managing the complex financial risks unique to credit funds. With extensive experience working alongside funds, we understand the challenges faced and deliver tailored solutions to ensure financial stability, optimise returns, and manage risk effectively.
Credit Funds
Key Challenges
Interest Rate Volatility
Credit funds often deal with floating-rate loans, making them highly susceptible to interest rate fluctuations. Decreasing rates can significantly impact portfolio returns and affect asset valuations.
FX Exposure
Many credit funds lend internationally or hold assets denominated in foreign currencies. This exposes them to foreign exchange risks, where fluctuations in currency values can erode returns and affect portfolio performance.
Liquidity Management
Credit funds manage diverse portfolios with varying maturities and cash flow profiles. Effective liquidity management is crucial to ensure funds are available for investor withdrawals, debt servicing, or new investments.
Managing Credit Facilities
Credit funds often manage multiple credit facilities, with associated risks including mark-to-market fluctuations. Appropriately managing collateral balances is critical to ensuring capital is efficiently allocated and investable capital is maximised.
Satisfying Mandate while Limiting Tail Risk
While maintaining the core mandate of being a floating rate fund, credit funds need to effectively hedge floating rate books to mitigate the impact of interest rate volatility in tail risk scenarios, without deviating from their investment strategy.
Hedge Structuring
Hedging strategies need to appropriately reflect the underlying exposure, be cost-effective and provide robust protection against market risks.
By addressing these challenges with a comprehensive risk management framework, we help credit funds protect returns, enhance capital efficiency, and ensure long-term stability.