#United States #Columbus #Investment Management #Diamond Hill #Securitized Credit Fund

Diamond Hill Introduces Securitized Credit Fund

In a strategic move to enhance its investment portfolio, Diamond Hill, a renowned boutique investment management firm, has officially unveiled its Securitized Credit Fund. This latest addition is structured as an interval fund and aims to leverage the firm's extensive expertise in securitized bonds, targeting less liquid and lower credit quality bonds that are usually overlooked in traditional markets.

Unveiling the Fund

Announced on December 16, 2024, the Securitized Credit Fund is set to be managed by Henry Song, a CFA, whose leadership will likely steer the fund towards achieving its investment objectives. What sets this fund apart is its interval fund structure, which permits quarterly redemptions while allowing investors to purchase shares on a daily basis. This flexibility is particularly advantageous for capturing opportunities in markets that have higher return potential but come with lower liquidity.

As Heather Brilliant, CFA, and Diamond Hill's CEO articulated, "The Securitized Credit Fund leverages our fixed income team’s deep and differentiated expertise in securitized assets to build a focused portfolio within that asset class." This initiative expands their capabilities, paving the way for more targeted strategies that appeal to investors seeking distinctive risk and return profiles.

Market Opportunity

The team puts a significant focus on the securitized sector, which historically exhibits inefficiencies in pricing. Song noted that this gap presents a promising landscape for their disciplined bottom-up security selection strategy, allowing the firm to uncover undervalued opportunities. Currently, the Diamond Hill fixed income team manages an impressive $5.9 billion in assets as of November 30, 2024, highlighting its robust market position.

Securitized Credit Fund Structure

The fund is designed as a non-diversified, registered closed-end interval fund, compliant with the Investment Company Act of 1940. This means it will conduct quarterly repurchase offers, allowing shareholders the opportunity to redeem between 5% to 25% of the outstanding shares at net asset value. Nonetheless, investors should be cognizant of the potential complexities that arise should demand exceed the available shares for repurchase, as fulfillment of such requests will occur on a pro-rata basis.

Risks and Considerations

Prospective investors should approach this fund with a clear understanding of its inherent risks. The Securitized Credit Fund involves a considerable amount of illiquidity and is not recommended for those individuals requiring immediate access to their investments or with a lower risk tolerance. The fund's share repurchases are strictly governed by its quarterly policy, emphasizing the importance of assessing personal investment needs and timelines.

Furthermore, conditions such as rising interest rates can adversely affect fixed-income investments, and specialized risks are affiliated with securitized bond investments, including credit risk and market volatility. Diamonds Hill emphasizes transparent disclosures, ensuring that investors are aware of these risks prior to committing their capital.

Conclusion

The Securitized Credit Fund by Diamond Hill marks a significant step forward for the firm in diversifying its portfolio offerings while meeting the evolving needs of investors. By capitalizing on its established fixed income expertise and insight into securitized assets, the fund stands poised to explore the potential for higher returns in a less efficient market space. Investors considering participation in this unique fund should do thorough research and align their investment strategies accordingly.

For more information about the fund or to gain insights into Diamond Hill’s broader investment strategies, potential investors can visit www.diamond-hill.com.