In recent years, private equity firm Onex (OTCPK:ONEXF) boosted its financial firepower by signing up institutional investors into dedicated buyout funds.
Now Onex is offering individuals the same sort of access to a dedicated distressed debt fund.
An arm of the Toronto-based company called Onex Credit Partners filed the paperwork Thursday for a publicly traded fund that will be called OCP Credit Strategy Fund. RBC Dominion Securities and CIBC World Markets are leading the initial public offering, and units will be sold for $10 each.
Onex has been running a distressed debt fund since 2001, with an 11-person in-house team making credit calls. That New Jersey-based team will call the host on the new fund. The IPO comes at a time when debt markets are dealing with the aftermath of last year’s market meltdown, and a recession.
Onex said in a press release that its credit team “believes that the dislocation in credit markets over the last two years has created an attractive environment for senior credit investors.”
U.S. distressed debt funds are among the best performing hedge funds, year to date, up an average of 14.9 per cent, according to a U.S. service called Absolute Return . Only convertible debenture funds have better numbers.
Over the past eight years, Onex's internal distressed debt fund, which it calls the OCP Debt Opportunity strategy, has outperformed all relevant benchmarks, including the S&P 500. The new fund for outside investors will use the same approach. Onex and its employees already have $65-million (U.S.) invested in their distressed debt fund.
Onex will not use leverage in its new fund, which lowers the risk associated with this strategy. The fund manager said in a press release that they
will generally select investments for the portfolio that meet the following criteria: (i) high levels of asset and/or cash flow coverage; (ii) attractive total return potential through a combination of current income and capital appreciation; and (iii) an anticipated company-specific event that OCP believes will trigger price appreciation.