Gulf Stream Asset Management LLC plans to add credit-related funds to its lineup, betting that if it enters the field now it will be positioned to capitalize when the credit markets rebound.
With the economy driving asset prices down, "the current market presents a historic level of relative value in the credit markets, which affords us the opportunity to broaden the company's investment activities," Mark Mahoney, Gulf Stream's president, said in an interview.
The Charlotte company, which manages $3.8 billion of corporate credit portfolios for global institutional investors, will launch a credit-dislocation fund and a multistrategy credit hedge fund by the end of the first quarter, Mr. Mahoney said.
Mark Zusy, Gulf Stream's chief financial officer, said credit-related products that can provide "equity-like returns for investors" have strong potential. This is a particularly good time to buy credit-related investment portfolios with a mix of corporate credit associated with cable, health-care, and utilities companies, he said.
A number of large asset managers are raising capital to invest in this market, Mr. Zusy noted, including BlackRock Inc. and Pacific Investment Management Co. LLC. (Pimco launched a long-term credit fund last week.)
Geoffrey Bobroff, an analyst with Bobroff Consulting in East Greenwich, R.I., said companies are exploring a variety of alternatives to help investors add assets.
"I guess both BlackRock and Pimco assume that the Treasury will start to move out the maturity spectrum at some point as it is raising the capital to deal with the stimulus package," Mr. Bobroff said. "Issuing a lot of longer-term debt makes sense."
Other analysts said that even in the worst financial times there are opportunities to add products and assets. Denise Valentine, a senior analyst in the securities and investments group at Aite Group, said the extreme market pullback from credit probably has left money on the table.
"There certainly will be business opportunities among the debris," she said. "Since we tend to operate in a cyclical business world, it's likely we will see credit products in the future. Firms willing to venture forth in areas they feel they can add value are likely to gain first-mover advantage."
Carmen Effron, an analyst with C.F. Effron Co. LLC in Weston, Conn., said the adage about one man's trash being another man's treasure is applicable here.
"Most managers are leery of trying to time and judge the credit markets at the moment," Ms. Effron said. "They are jumping in. That takes guts and superior internal controls for decision making.
Ms. Effron said the markets are showing signs of consumer confidence, with economists projecting that markets could rebound before the end of the year.
Gulf Stream plans to take advantage of current market conditions and expand before the rebound begins. It opened a New York office last month and hired two industry veterans to leadership posts: Mr. Zusy, whose 25 years in the capital markets industry have included a stint with Lehman Brothers that ended in May, and Sukai Liu as head of hedge fund portfolio management. He founded and was the president of Visor Alternative Investments LLC, a multistrategy credit and relative value investment manager.
Istithmar World Capital, the private-equity and alternative investment arm of Istithmar World of Dubai of the United Arab Emirates, acquired a majority stake in Gulf Stream last year.
David Jackson, Istithmar World Capital's chief executive officer, said Gulf Stream's decisions to beef up its product offerings and senior-level expertise and to open a New York office meshes with Istithmar's strategy for unlocking growth in credit-related investment activities.
