BlackRock Global Long/Short Credit Absolute Return Credit
Case Study: Idiosyncratic Short Position
Background
Within the technology sector, cloud
infrastructure, software and services has
become an area many companies are
focusing on given forward growth
projections
However, there are sizable differences
between some of the various players, both
in terms of product capabilities as well as
balance sheet capacity to invest
Bond Price
109
107
105
103
101
Industry laggard presented deteriorating fundamentals
99
97
95
Sep-17
Oct-17
The Opportunity
Nov-17
●
Short Rackspace Debt
●
●
We identified a company (Rackspace) that was
underperforming competitors from a growth and balance sheet
perspective
Additionally, we believed Rackspace could be negatively
impacted by recent U.S. tax reform around interest expense
given their high debt burden
After the team identified these potential weaknesses,
Rackspace became a short candidate
Dec-17
Rackspace Debt
Jan-18
Feb-18
Mar-18
Source: Bloomberg, as of 3/31/18. Trade is represented by a 8.625%, 2024 maturity bond for Rackspace Hosting Inc. For illustrative purposes only. As of 3/31/18, the fund had a
-0.13% position in Rackspace Hosting.
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FOR FINANCIAL PROFESSIONAL USE ONLY. NOT TO BE SHOWN OR DISTRIBUTED TO THE GENERAL PUBLIC.
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