Signal detects European CLO options for upcoming fund

Michelle D’souza

Reporter

Signal Capital has plans to capitalise on the European CLO and ABS market, with sources indicating the special situations fund manager is seeking to launch a relative value hedge fund focused on these asset classes in September.

Creditflux reported in June that the London-headquartered manager was hiring CLO investor Milan Kecman from Alcentra. Kecman will spearhead the strategy alongside Nick Waring, who joined last March.

Signal has significant expertise in the structured credit market, with its co-founder and chief investment officer Elad Shraga serving as global head of structured finance at Deutsche Bank from 2009 to 2015.

Waring is also a former Deutsche Bank official, most recently serving as global head of securitised trading and head of European investment grade and high yield trading. Shraga tells Creditflux that Signal was not enamoured with the CLO market before the pandemic, but has since found it more appealing.

“The spike in credit spreads shook a few hands we felt the market needed”

Elad Shraga, Co-founder and chief investment officer | Signal Capital

“Pre-covid crisis the CLO market plugged along, and we felt that the pieces were laid and fairly stable,” says Shraga. “The spike in credit spreads last year shook a few hands we felt the market needed — some players left the market and some were hesitant to return.”

Officials at Signal believe a prolonged period of dislocation would suit its special situations fund. The firm invested in junior debt tranches last year and, when they rallied, rotated into equity.

On the back of a shake-up in capital supply chains and the quick CLO rebound, Signal believes it would be opportunistic to dedicate a strategy to CLOs and ABS.

This will include European CLOs, aviation and consumer ABS, including auto loans and credit cards, among a variety of other assets.

“Depending on where we are in the cycle, we will look as deep as equity and restrictive equity,” says Shraga.

“When the opportunity comes up in the relative value senior part of the cap stack, then absolutely,” he adds. “The idea is to look at anything that makes sense on a risk-adjusted basis in the space, and look for the value chain in the smaller parts of the capital structure.”

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Global credit funds & CLO's

August 2021 | Issue 237

Published in London & New York.