High Yield Fixed Income – focused on stringent risk control first and foremost
- A highly experienced team of co-portfolio managers with an average of 18 years of experience, working in close collaboration with an experienced team
- A bottom-up, value-oriented investment process is employed with an emphasis on continuous top-down risk management
- A collaborative team-based approach is favoured, helping to facilitate transparent and efficient portfolio management
Invest in bonds that offer higher return potential than most fixed income
High-yield bonds are defined as corporate bonds rated below 'BBB−' or 'Baa3', ratings that are considered sub-investment grade, by established credit rating agencies. High-yield corporate bonds typically offer higher yields with less duration than most fixed income alternatives. We view this relatively high ‘income premium’ and lower price sensitivity to rising interest rates as potentially attractive attributes of high-yield corporate bonds, despite additional credit risk present in sub-investment grade bonds. It is important to note that relatively high yields reflect the relatively higher risk of high-yield corporate bonds.
We offer a disciplined and proven investment process
We believe that the successful implementation of our investment process represents an investment style with lower downside volatility than the overall market and the potential for superior returns over a full market cycle. The dual focus of the investment process on stringent, minimum margin-of-safety requirements, and pricing that overcompensates for estimated default risk is by nature contrarian in implementation. Margin-of-safety is a calculation which considers the 'real-world' value of a company relative to its debt obligations, as well as its future free cash flow projections.
Our bottom-up, value-oriented investment process strives to minimize default risk compared to the broader high-yield market
Our investment philosophy is rooted in the conviction that high-yield corporate fixed income investing is first and foremost about risk control. Default risk is the dominant risk factor, and all portfolio investments must meet stringent, and quantifiable minimum ‘margin-of-safety’ requirements. Secondarily, the investment process strives to never buy credit risk at the wrong price by utilizing a process focused on maximizing the default-adjusted yield and spread of a diversified portfolio. This process defines the relative value of credits that meet our margin-of-safety requirements, but present different estimated default risks. Our fundamental credit analysis and investment process also captures ESG risks including governance, business practices and industry and contingent liabilities related to environmental issues.
Matt Philo and Co-Portfolio Manager Jason Epstein are equally responsible for the day-to-day management of the high yield strategies. Together the two comprise a strong partnership drawing upon their extensive investment management experience while working with talented fundamental credit analysts. Whenever possible, all investment team members participate in credit discussions relevant to portfolio decisions. The team’s structure and collaborative investment philosophy targets optimal decision making processes, minimal key-person risk and creates a strong, collegial credit culture.
Our corporate RI strategy is based upon three strategic pillars of quality, stewardship and engagement.
We partner with our clients to provide solutions that maximize 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 utilize third party monitoring services for our direct holdings. Learn more about the High Yield Fixed Income team's approach to Responsible Investment.