First State Investments’ High Yield Group recently passed the 3-year performance anniversary. Our current High Yield Strategies are long-only corporate credit, with no leverage and no derivatives.

Portfolio Managers Comments

“We’re pleased with the performance of our High Yield Composites since inception. Most particularly because our primary focus has remained, as always, on the goal of capital preservation during downside market corrections. Our time-tested, investment process should lead to continued investment success if implemented with stringent discipline, by our talented and diligent team.”

- Co-Portfolio Managers/Co-Heads of High Yield, Matt Philo and Jason Epstein

Past Performance is not indicative of future performance. The performance of the Broad High Yield Composite is hypothetical, as the assets of the of the Select High Yield strategy and the Quality High Yield strategy have been combined to create the Broad High Yield strategy.

Peer group percentile rankings are versus eVestment’s US High Yield Fixed Income (for Broad & Select High Yield), Quality High Yield Fixed Income (for Quality High Yield) & Short Duration High Yield FI (for Short Duration High Yield) universes. Data shown includes all results reported in eVestment as of May 27, 2020 and does not reflect any selection by FSI.

Philosophy

We believe that high yield corporate investing is first and foremost about risk control:

  • All securities must meet stringent “margin-of-safety” metrics, and offer yields and spreads that over-compensate for estimated default risks.
  • Optimal portfolio construction combines bottom-up credit selection with top-down portfolio risk management.

 

Objective

We strive to maximize the default-adjusted yield and spread of a diversified portfolio, with the goal of generating superior returns over a market cycle with less volatility than the broad high yield market

Investment Process Tenets

Rigorous implementation, simple in concept:

Downside Protection / Capital Preservation

• Minimum Margin-of-Safety, requirements; quantified and stringently applied

• Qualitative Fundamental Corporate Assessments, to further safeguard against default risk

Accurate Relative Value Assessments

• Default Adjusted Methodology, spread premium necessary to overcompensate for default risk

Upside Potential

• Catalysts for Total Return, expected to result in total returns above a coupon base yield

Portfolio Construction

• Maximize the default-adjusted yield and spread of a diversified portfolio

• Combines dynamic fundamental, bottom-up credit selection with continuous top-down portfolio risk management

High Yield Portfolio Managers

Matt Philo, CFA

Senior Portfolio Manager, Co-Head of High Yield

Matt joined First State Investments in May 2016, and has 31 years of industry experience.

Matt was Executive Managing Director & Head of High Yield at MacKay Shields LLC, serving as Portfolio Manager to $22 Billion of assets across institutional and retail accounts. He joined MacKay Shields in 1996 and managed institutional accounts for the firm from September 1996 through May 2014.

He managed the Mainstay High Yield Corporate Bond Fund (MYHIX) from December 2000 through May 2014.

Matt has an MBA in Finance from New York University Stern School of Business, and a BA in Economics from University at Albany SUNY. Matt is a CFA Charterholder.

Jason Epstein

Senior Portfolio Manager, Co-Head of High Yield

Jason joined First State Investments in September 2016, and has 18 years of industry experience.

Jason was a Managing Director with Oak Hill Advisors where he was responsible for managing a team of analysts covering a broad range of sectors.

While at Oak Hill he was responsible for managing leveraged credit investments in the building products, chemicals, homebuilding, lodging and paper & packaging sectors.

Prior to Oak Hill, Jason was an analyst within investment banking at Credit Suisse First Boston where he was a member of both the Financial Sponsors and Technology groups.

Jason has a BS in Economics from The Wharton School, University of Pennsylvania.

High Yield Composite Gross Performance - Annualised

Annualized/Calendar Year Performance - Inception 30 April 2017

First State Investments as at 30 April 2020. The Inception Date of the FSI High Yield Composites was May 1, 2017. Past performance is not a reliable indicator of future performance. The assets within the FSI Select High Yield Composite and the FSI Quality High Yield Composite have been combined to create the FSI Broad High Yield Composite. Composite returns are gross of fees in USD. Performance figures do not reflect the deduction of investment advisory fees, commissions and other charges. Note: due to rounding percentages may not precisely reflect the absolute figures.

High Yield Composite Net Performance - Annualised

Annualized/Calendar Year Performance - Inception 30 April 2017

First State Investments as at 30 April 2020. Composite inception date is 1 May 2017. Shown as net of fees in USD, deducting institutional share class fees (AMC: 0.40%). The assets within the FSI Select High Yield Composite and the FSI Quality High Yield Composite have been combined to create the FSI Broad High Yield Composite. These figures refer to the past. Past performance is not a reliable indicator of future results.

High Yield Composite Net Performance - Discrete

Annualized/Calendar Year Performance - Inception 30 April 2017

 

First State Investments as at 30 April 2020. Composite inception date is 1 May 2017. Shown as net of fees in USD, deducting institutional share class fees (AMC: 0.40%). The assets within the FSI Select High Yield Composite and the FSI Quality High Yield Composite have been combined to create the FSI Broad High Yield Composite. These figures refer to the past. Past performance is not a reliable indicator of future results.

Important Information

This document has been prepared for informational purposes only, for Professional Clients, and is only intended to provide a summary of the subject matter covered. It does not purport to be comprehensive or to give advice. The views expressed are the views of the writer at the time of issue and may change over time. This is not an offer document and does not constitute an offer, invitation or investment recommendation to distribute or purchase securities, shares, units or other interests or to enter into an investment agreement. No person should rely on the content and/or act on the basis of any material contained in this document.

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Issued by First State Investments International Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registered number 122512). Registered office: 23 St. Andrew Square, Edinburgh, Midlothian, EH2 1BB number SCO79063.

First State Investments entities referred to in this document are part of First Sentier Investors a member of MUFG, a global financial group. First Sentier Investors includes a number of entities in different jurisdictions, operating in Australia as First Sentier Investors and as First State Investments elsewhere. MUFG and its subsidiaries do not guarantee the performance of any investment or entity referred to in this document or the repayment of capital. Any investments referred to are not deposits or other liabilities of MUFG or its subsidiaries, and are subject to investment risk including loss of income and capital invested.

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