Muzinich & Co. is to launch a credit long-short fund that uses the company’s fundamental credit research to generate returns through a four-pronged investment strategy.

The new HedgeYield fund will be based on an existing investment strategy that Muzinich & Co. sub-advises for Deutsche Bank on the X-markets platform.

Returns are generated from a core long strategy, with additional investment growth through short term high yield bonds and credit arbitrage opportunities.

Leverage is generally only applied to short maturity bonds with exceptional visibility on repayment of principal.  Downside volatility is mitigated by short positions in companies identified by Muzinich’s research process as having short or long-term negative prospects.

Josh Hughes, UK director for Muzinich & Co., said: “With the future prospects for many asset classes looking uncertain, high yield has much to offer for investors looking for income and capital growth.

“When you couple our core high yield approach with allocations to short maturity debt, credit arbitrage and selected short positions, the results can be compelling, as the fund we run for Deutsche Bank has demonstrated.

“The performance of this strategy has attracted a lot of attention from potential investors and we believe now is a good time to launch our own version, which we will run in conjunction with the X-Markets proposition.”

Since inception in 2004 the dbX-High Yield 1 Fund has outperformed the HRFI Hedge Fund Weighted Composite Index and HRFI Fixed Income Relative Value Corporate Index. During the first 10 months of 2011 until the end of October, the fund had generated 9.35%.

Muzinich expects to launch the new fund in February 2012. It will be an Ireland domiciled Qualifying Investor Fund and will offer monthly subscription subject to a 30 day notification period.