Does the US High Yield market represent 53% of the best ideas for global high yield investors? (September 2021) We believe that to outperform in the global high yield markets you must be prepared to be different. Those that try to mimic credit indices, rarely outperform over the long term. Since 2006 we have managed credit funds by focusing on the size of the opportunity, not a bond's index weight. In this short note we highlight our recent move to dramatically reduce our US exposure. When you view the credit markets through a "value lens" rather than index weightings, the opportunity set looks rather different. Unlike the main global high yield indices, we do not think 53% of the best opportunities are currently to be found in the US high yield market; for now, we think there is better value elsewhere.
Selective small cap exposure enhances returns in EM corporate credit (August 2021) The main EM credit indices are constructed based on the market cap size of an issue. The larger the issuer size, the larger their representation within the index. This often results in highly leveraged issuers representing a significant proportion of these indices. As a value investor we focus on the size of the opportunity not the index weight. Over multiple market cycles since 2010 we have demonstrated that some exposure to small cap enhances long term returns. In this short note we provide an example of a smaller issuer which highlights the opportunities that still exist for active, unconstrained investors.
Why size matters (April 2021) As a value investor in credit markets we use our active bottom up fundamental approach to identify bonds trading below their intrinsic value. As the global economy continues to recover, spreads across larger bonds have rapidly compressed back to pre-pandemic levels. As we have witnessed in previous cycles, smaller issuers have been much slower to react to the improving global economy. In this short note we highlight the opportunities we see in mid/smaller issuers and provide examples of why we find better value in this overlooked area of the market.
Value investing in the Global High Yield Market (February 2021) As an unconstrained value focused manager, we seek to buy bonds where the spread over compensates for the risk of default. In this note we highlight the importance of systematic factors as drivers of returns and highlight how we exploit opportunities in often overlooked areas of the market.
EM Corporate Debt - An allocation suitable for an uncertain world (January 2021) With more than 80% of global sovereign debt now yielding less than 0.5%, there is an obvious lack of income generating opportunities for investors. With rates at such low levels a mild pick-up in inflation as we have witnessed over the last couple of months has had negative consequences for duration sensitive assets. In this note we examine the opportunities we believe to be present in Emerging Market Corporate Debt.