Ivy Crossover Credit fund aims to exploit junk, high-grade overlap

By Susanna Moon

Chicago, April 4 – Ivy Investment Management Co. said it has launched its Ivy Crossover Credit Fund that homes in on companies at the threshold of either investment-grade or high-yield status.

The fund is managed by Rick Perry, who labels the targeted securities as either fallen angels that are bonds at or near the lower end of investment grade or rising stars at or near the higher end of high yield debt, according to a company announcement.

The strategy provides a lower level of risk than high-yield investments while also offering higher returns than standard-grade bonds and a lower correlation to interest rates, the release said.

“By focusing on bonds of companies either on the verge of losing, or gaining, investment-grade status, and actively responding when a bond crosses over that threshold, this fund may put investors in an opportune spot as the market reacts to ratings,” Thomas W. Butch, president and CEO of Ivy Distributors, Inc., said in the company press release.

Added Perry: “Through daily analysis of securities, we try to benefit from market dislocations and volatility that occurs when credit issues get downgraded to high yield from investment grade, or get upgraded to investment grade from high yield, by credit ratings agencies.”

“In our view, investments in the crossover market offer the potential for higher risk-adjusted returns without the high correlation to interest rate changes that accompany investment grade credit,” Perry said.

“That can be important in an environment where interest rates, while low, have begun to move higher.”

The investment adviser is a wholly owned subsidiary of Shawnee Mission, Kan.-based Waddell & Reed Financial, Inc.

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