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Shorecliff Asset Management has achieved a remarkable feat in the past year. Founded by Grant Nachman and Anthony La Lota, former executives at Oaktree Capital Group, Shorecliff has seen its assets soar, tripling from $150 million to over $500 million in just 12 months.

Shorecliff Pivoted Away From Distressed Assets

Bloomberg tells us that the Newport Beach, California-based firm has quickly gained attention for its savvy investment strategies, particularly in higher-quality performing credit.

Unlike many other investment firms, Shorecliff pivoted away from distressed assets, focusing instead on leveraged loans and bonds. Approximately two-thirds of its assets are in leveraged loans, with the remainder in bonds, reflecting its confidence in these markets.

Shorecliff's success comes at a time of significant changes in the investment landscape. The global pile of distressed debt has shrunk dramatically, from nearly $1 trillion to just $208 billion since the pandemic's peak.

This growth reflects broader market trends, including a significant reduction in global distressed debt and rising interest rates, making it more profitable for money managers to invest in slightly safer debt with higher yields.

A Targeted Approach

Shorecliff's strategy involves targeting B-rated credits in sectors like financial services, telecommunications, and media while avoiding riskier industries like oil, gas, minerals, and mining. Despite its smaller size compared to major credit-investment firms, Shorecliff achieved an annualized return of 13.9% in 2023 without charging a performance fee, according to filings.

This success aligns with the strong performance of high-yield and leveraged loans in the market, as indicated by returns of 13.3% for leveraged loans and 13.4% for high-yield bonds in 2023.

Other investors, such as MidOcean Partners and AS Birch Grove, have also seen returns in the low teens by capitalizing on mispriced assets and floating-rate loans. Overall, Shorecliff's growth and performance demonstrate the evolving landscape of credit investment and the opportunities it presents for specialized firms.

Global Debt Landscape

However, Shorecliff's ascent is not without challenges. The global debt landscape remains complex, with total debt reaching 238% of global GDP. Despite a slight decrease in debt levels over the past two years, public debt remains stubbornly high, posing risks to economic stability.

Policymakers worldwide face the daunting task of preserving debt sustainability while navigating uncertain economic conditions.