Writing to investors in his Q3 letter, Loeb explained that while spreads are "not extraordinarily wide", the strength of yields combined with dispersion between ‘high quality' and more complex situations provides a strong opportunity.
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He argued that while overall corporate leverage is high, when the average is disaggregated public credit leverage remains "modest by historical standards", with the higher leverage levels residing in private credit.
Loeb pointed to a range of opportunities in "improving credits with ‘bulletproof' securities" by virtue of their seniority, security, or both, and has focused on "relatively defensive" industries including healthcare and telecoms.
"We also have concentrated on credits that face challenges in their capital structures or businesses that we believe are temporary and relatively easy to overcome," he added.
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Rising rates have also boosted interest in structured credit, a "compelling asset class", according to Loeb, as unlevered yields in residential mortgages and consumer loans push into the 8-12% yield range.
This is an opportunity first spied by money manager and insurance companies early in the year, but now joined by hedge funds and private credit houses.
Across asset-backed securities, the firm has witnessed increasing default rates and loss severities in recent months, leading it to focus on the commercial real estate sector, in which it believes there will be opportunities to invest in senior tranches from forced sellers.