High Yield

When the bond markets experience turmoil the top performing managers have historically taken a hard hit likely due to large bets across various sectors or duration. Diversifying your sources of return may be critical to providing more consistent outcomes.

Bonds at the lower-end of the investment grade universe have historically offered higher risk-adjusted returns with minimal added default risk.

The risk-reward tradeoff between yield and risk needs to be consistently assessed and monitored, as the impact of even 1 - 2% in defaults can quickly erode any previous short-term yield gains.

Portfolio concentration can add idiosyncratic risk that we systematically avoid by effective diversification that involves setting individual security weight constraints, diversifying by maturity, industry, sectors, countries and currencies.

We purposefully avoid esoteric securities and short-term speculative positions that can be costly during times of stress in order to avoid unintended outcomes that may occur with the increased complexity and risk.

Income and risk/reward profile compare favorably to investment-grade bonds.

Purposeful risk management strategy aims for lower interest rate risk than intermediate investment grade bonds.

Fundamental credit research seeks securities that appear to be attractively valued versus peers in order to capture potential favorable spread compression.