The stressful world of the credit fund manager

Investing in credit need not be rocket science. But it definitely requires something more than a dartboard approach. At a time when funds are pouring into Europe's fast-growing credit markets - and when returns are high but so are volatility and the frequency of credit shocks - investors are finding that success in the credit arena boils down to three things: diversification, specialization and, above all, intensive and constant research.

These are heady times for European credit fund managers: hairy at times, and sometimes plain scary, but undeniably exciting.

The supply of non-government bonds is growing fast – offering an ever-widening array of names, sectors, ratings, issue types and maturities. Demand is growing even faster, with investors seeking new asset classes and chasing yield after two years of dismal equity market performance and low returns on government bonds. And all the while the frequency and severity of credit shocks are rising too – creating almost daily opportunities for bondholders to get burnt in what are still relatively new markets.