Abundant opportunity in liquids and illiquids
Sona Asset Management Credit alpha
By HAMLIN LOVELL FIRST PUBLISHED IN JUNE 2022 T
Left: John Aylward, Founder, Sona Asset Management
he old Irish word for good fortune and good luck is sona and its symbol in ancient Celtic script sits on the office wall of the eponymous firm’s headquarters in London’s St James’s Street. Sona Asset Management, founded by John Aylward in 2016, is renowned for its leading
footprint in European credit, especially high yield; it also trades US credit with a New York office. It runs two strategies: liquid all weather long/short credit launched in 2016, spanning high yield, investment grade and financials, as well as convertible bonds, in the US and Europe, and an illiquid locked up capital solutions strategy active in Europe, launched in 2020. Firm assets exceed $2 billion.
Sona runs the gamut from private to public credit and invests across the capital structure from senior secured to equity linked. In the spring of 2022, liquid credit repriced to factor in higher rates and wider risk premiums, and Sona is also identifying extraordinary opportunities for further yield pickup from the illiquid deal flow it accesses, often on an exclusive or preferential basis.
The 33 staff have in many cases worked together and been friends for between ten and twenty years, and several of them were Aylward’s colleagues when he ran European credit strategies at Claren Road Asset
Management and Highbridge Capital Management. “The team share a strong cultural fit and a DNA focused on using differentiated perspectives to deliver convex return profiles,” says Aylward. Throughout his investing career, Aylward led teams managing credit strategies that generated a similar return profile to Sona: double digit average annual returns with low correlation, a strong asymmetric skew, minimal drawdowns and mainly positive months.
Aylward started on the sell side, joining Deutsche Bank in a high yield trading role after law school at Dublin’s Trinity College; he never contemplated legal practice. “I always knew that I wanted to work with numbers, markets, finance and commerce and viewed law – the most sought-after profession in Ireland – as the best route into it,” he says.
All weather performance Sona’s objective is to make equity-like returns consistently over the medium term, and this has been achieved. Highlights of performance drivers between 2018 and 2022 show how versatile the strategy has been in very different years. “The last five years have all been very difficult, with risk off in 2018, risk on in 2019, drama in 2020, recovery in 2021 and challenges again in 2022. There has been a lot of change and we have performed well in each year in up and down markets. Though we might not always expect to outperform a long only strategy during bull markets, we have actually done so thus far, and we do aim to be uncorrelated and outperform at times of stress,” explains Aylward.
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