Institutional Strategies

High Yield Fixed Income

The strategy focuses on total return through a deep-dive credit research process that is the foundation for security selection. A high priority is placed on individual credit selection and bottom-up credit research instead of sector bets on future market direction. Our research and credit selection extends across the capital structure (high yield bonds and senior loans), which we believe allows us to find the best risk-adjusted return opportunities.

Investment Philosophy

Our Goal: We seek to own a portfolio of investments that offer the best risk adjusted returns in the non-investment grade credit markets throughout the cycles.

  • The non-investment grade market is often times underfollowed and highly complex which causes securities to be mispriced.
  • We believe that superior risk-adjusted returns can be achieved by exploiting the numerous dislocations that can occur in the high yield markets.
  • We believe the nature of these dislocations can be cyclical, company specific or sector/industry specific and can be identified through extensive, company and financial analysis.
  • We believe investing across the capital structure (high yield bonds and senior loans) allows us to find the best risk-adjusted return opportunities.

Investment Process

Credit research and security selection are typically the primary sources of alpha.

  • Modeling company financials - what is driving top and bottom line?
    • Use proprietary model.
    • Metrics include: leverage, free cash flow as a % of debt outstanding, EBITDA (margins and their historical consistency), management tenure and decision making history, EV multiple relative to leverage and covenant protection (or lack thereof).
  • Develop historical picture of company and its financials.
  • Evaluate sector and company's position in sector using Porter's Five Forces as framework.
  • Utilize independent research and third-party verification whenever possible.
  • Direct contact with management, competitors, customers and vendors. Site visits.

Don't manage to the benchmark.

  • Generally underweight top 30 issuers in benchmark.
  • Opportunity for alpha in Tier 2 issuers.
  • In order to outperform, cannot look like everyone else.

Idea Generation

High Yield chart
  • Portfolio manager
  • Analysts
  • Internal screens
  • New issue calendar
  • Consultant/expert networks
  • Buy-side network
  • Investment bankers
  • Sell-side research
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Key Features

Composite Performance History Since 01/01/2003
Benchmark ICE BofAML US High Yield Index
Sector Ranges Generally +/- 10% of the benchmark; the strategy also invests in loans, which are not included in the benchmark. This is where the strategy sees its largest divergence from the benchmark.
Position Size Initial positions around 0.5–1.0%; typically 1.5–2.5%; 5% maximum.
Cash Allocation Typically below 5%
Investment Vehicles
  • Institutional Separate Account
  • Variable Insurance Portfolio
  • U.S. Mutual Fund: Institutional Share Class