We aim to generate superior returns over the full market cycle, by maximising risk-adjusted returns with lower volatility than the broad high yield market.
High Yield Fixed Income – focused on stringent risk control first and foremost
- A highly experienced team of two co-portfolio managers with an average of 18 years of experience, working in close collaboration with talented credit analysts
- A bottom-up, value-oriented investment process is employed with an emphasis on stringent risk control
- A collaborative team-based approach is favoured, helping to facilitate transparent and efficient portfolio management
Why High Yield Fixed income
Potentially attractive attributes of high yield corporate bonds include higher income than investment grade issues and typically lower price sensitivity to rising interest rates. The higher yields on offer reflect greater risk when compared to investment grade securities, requiring a disciplined and unwavering focus on risk control.
How we do it
Overall we believe a combination of disciplined bottom-up credit selection with continuous top-down risk management will support optimal risk adjusted portfolio construction.
The team’s investment philosophy is based around our conviction that investing in high yield corporate bonds requires a high level of risk control. Given the possibility of defaults in the sector, it is critical that all investments meet stringent and quantifiable minimum ‘margin of safety’ requirements.
We seek to construct portfolios with minimum yield and liquidity requirements. The credit research process includes a ‘margin of safety’ measurement, focusing on the sustainability of cash flows as well as overall issuer quality based on a company’s assets, management and business strategy.
We also look for issuers with improving fundamentals, including corporate or financial restructuring programs that are planned or underway. These can be catalysts for credit improvement and, in turn, can help generate favourable total returns. ESG assessments are also a key factor in the assignment of internal credit ratings. These ratings are used to assess relative value when compared to other similarly rated issuers.
The strategy is co-managed by two experienced high yield investors, who work in close collaboration with a talented group of fundamental credit analysts. The team currently consists of five investment professionals, with an average of 18 years of experience.
A collaborative, team-based approach helps to facilitate transparent and efficient portfolio management. All investment decisions are made collectively following consultation and debate among all team members. Further, the flat team structure ensures key-person risk is minimised.
The investment team joined First Sentier Investors in 2016. The two co-managers have more than 47 years of combined experience in the high yield credit space, including several years managing one of the largest high yield mutual funds in the United States.
Prior to building a world-class in-house capability, management of the high yield allocation within First Sentier Investors' broader credit portfolios was outsourced to a third-party manager. Since joining First Sentier Investors, the team has been expanded and has successfully transitioned the assets previously managed by this external manager.
Our corporate RI strategy is based upon three strategic pillars of quality, stewardship and engagement.
We partner with our clients to provide solutions that maximise the probability that they will achieve their investment objectives. We assess our client needs based on three key criteria: risk tolerance, investment horizon and return ambition level. We utilise third party monitoring services for our direct holdings.
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