The Evolution of Credit

In today’s distressed market environment, credit, it turns out, is the new equity. Sam DeRosa-Farag, the new head of credit strategies for Chapel Hill, North Carolina–based Morgan Creek Capital Management, will release a white paper this month that describes an evolution in credit, in both the range and the depth of strategies now available. Credit investors can now go short, as well as invest in structured products and derivatives, just like equity investors. The fixed-income market is also benefiting from an aging population as pension funds move toward investment strategies traditionally viewed as more conservative. “This is where the opportunity happens. In the new era debt is the new equity,” says DeRosa-Farag, 57, a 13-year member of Institutional Investor’s All- America Fixed-Income Research Team and former principal and investment committee member at Ore Hill Partners, a $2.75 billion New York–based credit fund. His new job at Morgan Creek, with $8.3 billion under management, will be to find managers who are eager and able to take credit to the next level.