Investment Process

Our high yield team employs a widely accepted, value-oriented fundamental investment process that originated, rather uniquely, as part of a value equity group in the 1990’s. The team is structured as a practical partnership of experienced co-portfolio managers working in close collaboration with talented, fundamental credit analysts. Our disciplined and collaborative team approach aims to create a strong, focused credit culture.

Our full investment process

We believe the optimal, risk-adjusted investment process combines both dynamic fundamental, bottom-up credit selection, with continuous top-down portfolio risk management systems. Our investment process is depicted graphically below for illustrative purposes only: 

  • Defining the investable universe via a minimum yield spread, and minimum issuer size:
    • Minimum yield spread of 200 basis points over the comparable US Treasury note (one basis point is equivalent to 0.01%).
    • Minimum issuer size typically limited to US $150 million.
  • Minimum margin-of-safety requirements, quantified and stringently applied:
    • Excess asset coverage defined as ’real world‘ asset value relative to gross debt .
    • Positive ’normalised‘ free cash flow (not returned to shareholders).
  • Qualitative fundamental corporate assessments to further safeguard against default risk:
    • Criteria includes competitive position of business, management competency, environmental, social and governance factors, and bond specific attributes including protective covenants, relative priority and capital structure. 
    • Catalysts for total return from price appreciation driven by credit improvement:
  • Average/normalised free cash flow above 5% of gross debt:
    • Corporate restructuring, commonly from strategic operational improvements.
    • Financial restructuring, including an equity raise or debt restructuring.