US High Yield
The US High Yield strategy aims for a gross outperformance of 150 basis points per annum versus the Barclays Capital US Corporate High-Yield Bond Index over a full investment cycle.
The strategy seeks to generate total return by investing across the full maturity spectrum of below investment grade corporate bonds, denominated in US dollars. The strategy may also invest up to 30% in investment grade corporate bonds and government securities. The strategy typically does not invest in equities, leveraged loans, or emerging market sovereigns.
In the US High Yield strategy, we manage six key factors when trying to generate return. Three factors: issue selection (including investment decisions on seniority/subordination, covenant protection, maturity, and bond versus CDS exposures), sector weighting, and quality tilt typically contribute the majority of any excess returns relative to the Barclay Capital US Corporate High Yield Index. Positions in three other areas are also actively managed: geographic exposure, duration and curve positioning, and liquidity. These factors together contribute the balance of any excess returns versus the benchmark.
An integrated investment and credit research team of regional portfolio managers, led by Wes Sparks, aligning in-depth credit research with relevant current investment themes. The team uses proprietary quantitative tools designed to identify relative value opportunities. Strong team of career global credit analysts, including dedicated high yield credit analysts, with geographical and industry expertise.
- Fixed Income markets are global, interrelated and generally efficient but can overreact to events, creating investment opportunities
- We believe that a globally integrated team of research-driven bond investors is the ideal structure to take advantage of these opportunities
- Using a disciplined investment process and diversified strategies, we seek to generate consistent above benchmark returns with lower than average volatility
Our fixed income process consists of four distinct steps:
- Conduct in-depth proprietary market research (fundamental, quantitative and technical) to develop investment themes that we feel dominate markets over the ensuing 3-6 month period
- Develop and prioritize investment strategies, based on these investment themes, which determine portfolio positioning in the market: regional and currency allocation, sector biases, credit quality tilt and liquidity
- Implement investment strategies within the portfolio using a relative value framework to prioritize investment ideas and execute security selection
- Continually review portfolio within a rigorous risk management framework, emphasizing both issuer concentration limits and a tracking error volatility target
The cornerstone of our investment process is our weekly Fixed Income strategy meeting. Here, portfolio managers combine the outputs from our economic, quantitative and global credit research with bottom-up issuer research to establish investment themes and resulting strategies. Macro strategy, sector views and overall risk budgeting are determined at this meeting.
- Research-driven, themes-based investment process
- Analysts utilize a rigorous issuer evaluation process that combines fundamental, relative value and volatility assessment
- Centralized global credit research platform for fixed income and equity teams
- Relative value approach to decision making with opportunistic management in changing markets
- Risk management is embedded in our culture — we are lending our clients money
- Separate Accounts