Bloomberg News reports that the flagship $1.9bn Obsidian fund fell 4% in January after failing to anticipate “the extent to which markets would trade in lockstep with commodities,” according to an investor update, a copy of which was obtained by Bloomberg. The fund lost money from corporate credit and global-rate strategies.
Obsidian, led by Stuart Spodek, entered this year betting that investment-grade company debt would benefit from growth in the U.S., a “shallow trajectory for Fed hikes” as well as the European Central Bank’s monetary policy. Instead, fears of a global recession and a further decline in oil prices weighed on markets. A Standard & Poor’s report last month showed the outlook for corporate borrowers globally was the worst since the financial crisis.
“While we believe these recessionary fears are inconsistent with current fundamentals and our expectations for forward fundamentals, we underestimated the sharp and broad risk aversion in response to declining oil and weakening data,” the firm told clients.
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