Credit Research

Our global credit research team supports our entire global fixed income and credit business. Thorough credit research is the building block for our investment processes and the global team is an integral component in the success of our investment strategies.

  • Well established, multi-dimensional, bottom-up credit research
  • Credit research focuses on assessing credit risk and identifying deteriorating issuers
  • Analysis looking at a variety of dimensions enables significant breadth
  • Incorporate environmental, social and governance (ESG) factors in the credit assessment
  • Assign every credit security an internal risk rating, estimate of loss given default and information quality score
  • On average the team has over 15 years’ experience and over 7 years with the firm, as at June 2018

The following diagram outlines our credit research process: 

1.  Internal Rating: Every credit investment is assigned to a credit analyst who is responsible for constantly assessing the credit risk of both the issuer and the specific security. As part of this process an internal credit rating is assigned to each security and issuer. This is based on the analysts research and may differ from the rating agencies formal ratings.

2.  Rating Outlook: As well as the internal rating our analysts assign outlooks to these ratings. Outlooks reflect the stability of the current internal rating and are judged to be either Negative, Uncertain, Stable or Positive.

3.  Loss Given Default: An assessment of the loss to the bond holder should the bond default. Bond holders typically, though not always, are able to recover a portion of the value of a defaulted issue. For absolute returns, default risk is asymmetric – there is only downside for an investor when an issuer defaults. However, in an actively managed situation, it depends on whether the portfolio holding is greater than or less than the benchmark weight and in a situation where the position is below benchmark, the portfolio’s return can be higher than the benchmark return when a default occurs.

4.  Information Quality Score: A proprietary measure that assesses the quality of the information the analyst has used to make their assessment. This provides a basis for understanding the potential for ‘surprise’ and considers factors such as: the extent and quality of data available; the Issuer’s legal jurisdiction and reporting requirements; the level of research coverage by buy and sell side analysts and rating agencies; the issuer's corporate governance standards and its accounting standards relative to peers.