Corporate Opportunity Funds

Corporate opportunity fund tends to be highly diversified management Investment Company that seeks to achieve total return through a combination of current income and capital appreciation in a diversified portfolio of corporate debt obligations of varying maturities and other income producing securities. These include corporate bonds, debentures, notes and other similar types of corporate debt instruments.

Corporate opportunity fund tends to focus on corporate debt obligations rated in the lowest investment-grade category (Baa or BBB) and in the highest non-investment-grade category (Ba or BB). Corporate opportunity fund may also invests in residual interest municipal bonds and residual interest tax exempt bonds (inverse floaters), whose interest rates bear an inverse relationship to the interest rate on another security or the value of an index.

Corporate opportunity fund may purchase and write (sell) put and call options. Corporate opportunity fund can decide to invests in various industries, such as airlines, banking, energy, financial services, food and beverage, hotels/gaming, oil and gas, paper/paper products, telecommunications and utilities, or restrict itself only to couple of sectors of which it has a specialist knowledge.

The share price of corporate opportunity fund may include the capital gain that corporate opportunity fund has earned but not yet realized/distributed.

In their bottom-up approach, corporate opportunity fund's manager uses both qualitative and quantitative credit analysis to consider a variety of factors, including the issuers:

  • experience and managerial strength;
  • debt service capability;
  • operating outlook;
  • sensitivity to economic conditions;
  • current financial condition;
  • liquidity and access to capital;
  • asset protection;
  • structural issues;
  • covenant protection;
  • equity sponsorship.

Corporate opportunity fund's manager performs extensive credit analysis and meets frequently with prospective and purchased securities issuers. He also works closely with a team of analysts to search for the most appropriate securities to include in corporate opportunity fund's portfolio.

Who should invest in a corporate opportunity fund?

Corporate opportunity fund's investment approach is well-structured and based on traditional bottom-up analysis of companies fundamentals. Due to the fact that investment often takes place into companies with lower investment grade, corporate opportunity fund might attract individuals with high-risk profile. Nevertheless, since its portfolio tends to be highly diversified and benefit from both current income and capital appreciation, the corporate opportunity fund can be recommended to an investor with medium risk profile as well.