Our strategy employs a dynamic approach to investing, combining bottom-up and top-down analysis to uncover relative value opportunities in the broad high yield market. We believe total return opportunities in the high yield market are best captured through rigorous, in-house credit research and we use a proprietary risk and relative value rating system that helps position the portfolio based on the trade-off between risk and expected return at the security, industry and portfolio level.
Our firm devotes substantial resources to developing bottom-up fundamental research which typically contributes at least two-thirds of the alpha generated. In addition, we combine bottom-up fundamental credit research with a top-down strategic review to seek consistent, competitive risk-adjusted returns across varying market environments.
- Experienced team of high yield specialists who navigate through changing market conditions with a well-defined research process
- Rigorous, independent proprietary credit research produced by a team of dedicated high yield career analysts
- Proprietary risk and relative value rating system that enables credit selection in a consistent and repeatable framework
- Disciplined investment process that is exhaustive for credit selection and top-down strategy
- Tactical portfolio management designed to respond to changing market conditions
- Constant focus on downside risk management emphasizing a rigorous approach to portfolio diversification, position size management and a strong sell discipline
- The investment process seeks to identify opportunities based on credit fundamentals, capitalization and valuation.
- Credit analysis is comprehensive, emphasizing independent and forward-looking views. Analysts evaluate a number of fundamental factors, including management/ownership, a company’s business plan and competitive position and the overall industry outlook.
- Financial considerations include income statement, balance sheet and cash flow forecasts, asset coverage, liquidity, covenants and capital structure positioning.
- The Team leverages deep industry experience to develop additional non-company sources of information that help to identify and track critical fundamental issues. Proprietary modeling and forecasting is used to perform stress-test forecasts and enterprise value is analyzed to assess asset valuation, cash flow generation and industry comparables.
- Securities are assigned independent risk and relative value ratings based on the team’s proprietary research. Upside/downside valuation targets are determined at the onset of each purchase. Issue selection is considered on a relative basis to other investment opportunities, emphasizing strong relative value to the underlying risk of the issuer. In addition, the team adjusts the overall quality, capital structure and industry positioning of the portfolio to take advantage of varying market environments.
- The investment process results in a portfolio of 150 to 200 issuers that are well-diversified by credit tier, industry, issuer and security type.