(Bloomberg) -- Sculptor Capital Management’s Credit Opportunities Master Fund gained a net 17% last year after pouncing on beaten-down assets at the depths of the pandemic from mortgages to stressed company debt.

The around $2 billion fund notched its best outperformance over the broader high yield market in its roughly decade-long history, according to an investor letter seen by Bloomberg. 

It added to positions in long-term restructuring scenarios, and focused on stressed as well as distressed investments that got a boost from rising prices as the U.S. economy recovered from Covid-19 dislocations. 

A representative for Sculptor declined to comment. New York-based Sculptor, which oversees $6.5 billion under its credit opportunities strategy, manages $38.2 billion overall and employs 111 investment professionals in the U.S., Asia and Europe. 

Sculptor’s structured credit bets largely benefited amid “historically supportive financial conditions,” the letter said. In the fourth quarter, those gains were led by investments in residential mortgage-backed securities -- the fund’s biggest exposure -- that rallied thanks to strong housing demand, a modest default rate and low interest rates. 

While the fund remains bullish on the prospects for risk assets, it’s now taking a more cautious stance given the risk of virus variants, slowing growth and rising yields, according to the letter.

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