Fortress Long/Short Credit Fund

Principal Investment Strategy

The Fund seeks to generate returns by selecting fixed income securities using a variety of credit research-based sub-strategies. The Adviser believes that the fixed income markets regularly misprice securities that are exposed to credit, prepayment and liquidity risks. The Fund attempts to minimize the effects of changing interest rates on the Fund's Credit Management portfolio by hedging most or all interest rate risk using futures contracts and short sales. It may also use credit default swaps ("CDS") as a substitute for bonds when it believes these swaps derivatives offer more liquidity or higher expected returns.

In seeking to exploit these inefficiencies and provide the Fund with consistent returns, to the Adviser intends to:

  • Focus on optimal security selection
  • Emphasize sectors above-peer-group yields (spread sectors)
  • Target portfolios with little interest rate risk (zero duration)
  • Construct portfolios with attractive risk/reward characteristics

The Fund anticipates using the following research-based sub-strategies to exploit what it perceives to be mispricing in the corporate, MBS and ABS fixed income markets through traditional fixed income securities or CDS:

Directional: This strategy takes long or short positions in the corporate, MBS and ABS fixed income markets and seeks to generate consistent excess returns without incurring undue risk, focusing on:

  • Fundamental research (free cash flow and balance sheet analysis)
  • Capital structure and investor protections in debt (covenant analysis)
  • Detailed review of management and industry trends

Pairs Trades: This strategy seeks to profit from investing long in a fixed income security that is believed to have a more favorable outlook for credit quality or potential for capital appreciation while simultaneously selling short a similar fixed income security that is believed will decline relative to the long position. This strategy is also referred to as matched pairs trading because securities are often matched in dimensions such as credit quality, maturity, structure, duration or industry of issuer. By matching most if not all dimensions of the securities The Fund seeks to profit solely from the relative performance of the securities.

Event Driven: A strategy that may purchase the fixed income securities of companies involved in publicly announced mergers, takeovers and other corporate reorganizations, and use one or more hedging strategies in connection with the purchase. This strategy may also use options, financial futures, options on futures and credit default swaps.

Opportunistic: A strategy that seeks returns from what are believed to be temporary dislocations in the relative value between segments of the fixed income market based upon credit quality, liquidity, structure or type of issuer while hedging interest rate risk. This strategy may also use options, financial futures, options on futures and credit default swaps.

Due to its investment strategy, the Fund may buy and sell securities frequently and the Adviser may engage in active and frequent trading to achieve the Fund's investment objective.