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  • October 4, 2018
    Equities
    Pricing ESG risk in credit markets: reinforcing our conviction
    Michael Viehs
  • September 28, 2018
    Fixed Income Stewardship
    Amplified: We can all get along
    Eoin Murray
    In this podcast, Eoin Murray, Head of Investment, is joined by Mitch Reznick, Co-Head of Credit and Head of Credit Research and Hans-Christoph Hirt, Head of Hermes EOS and Stewardship Services to discuss the first instalment in a two-part paper we have recently published titled ‘we can all get along’.
  • September 12, 2018
    Fixed Income Stewardship
    Shared interests unite bondholders and shareholders
    Mitch Reznick, CFA
    The perceived divergence of priorities between bondholders and shareholders has led some to believe that these investors cannot engage with companies on the same issues. Some – remarkably - even question the legitimacy of bondholders (or other creditors) engaging with companies in the first place. However, given their financial stakes in a company, both types of investors not only have legitimate cause to engage, but also a professional duty to do so. So say, Mitch Reznick, Co-Head of Credit, and Dr. Hans Christoph-Hirt, Head of Hermes EOS, in We Can All Get Along, a new report dispelling myths surrounding joint company engagements between bondholders and long-term shareholders. Writing in the paper, the authors argue that the difference in the payoff profile of equities and bonds is sometimes cited as a reason that bondholders focus less on long-term factors, while shareholders want to see growth. However, there are strategic issues which the pair highlight as being relevant to a company’s current and likely future health and value creation, including the management of ESG (environmental, social and governance) factors. Arguing that although the cash flows from bonds held to maturity will not alter unless operating cash flows are substantially impaired, the authors highlight that unmitigated risks can weaken a company’s ability to fulfil its debt-service obligations.
  • September 10, 2018
    Fixed Income Stewardship
    We can all get along
    Hans-Christoph Hirt
    In this two-part paper, we assert that the shared interests of bond and shareholders in companies provide incentives to jointly engage companies – and generate positive outcomes by doing so. In this first instalment, we dispel the fallacy that the imperatives of bond and shareholders typically diverge, and argue that their common standing as financial stakeholders gives them the legitimacy to engage corporate boards and management teams to encourage sustainable growth and long-term value creation.
  • Amplified: ESG integration across Hermes Fixed Income
    Mitch Reznick, CFA
    In this podcast, Mitch Reznick, Co-Head of Hermes Credit & Head of Credit Research, looks at how ESG integration manifests itself across the varying fixed income products at Hermes. The following principal members of each of the fixed income teams join Mitch to discuss how ESG integration and engagement works for them: Patrick Marshall, Head of Private Debt & CLOs, Vincent Nobel, Head of Asset Based Lending and Andrew Lennox, ABS Portfolio Manager
  • June 7, 2018
    Fixed Income
    Amplified: ESG in credit markets
    Mitch Reznick, CFA
    ESG investing is an established practice in equity markets, where shareholders can exercise voting rights and engage companies on sustainability concerns. In this Hermes podcast, we ask: why is analysing environmental, social and governance risk – or ESG risk – important for fixed-income investors?
  • January 9, 2018
    Fixed Income
    Knockin’ on healthcare’s door: finding value in an industry under the knife
    Geoffrey Wan
    Valuations in the US public hospital sector are looking attractive, and that’s led us to reassess the investment opportunities within the US high-yield healthcare universe. But a highly selective approach is needed. New research by Mitch Reznick, Co-Head of Credit and Geoffrey Wan, Credit Analyst at Hermes Investment Management looks at the factors causing volatility as well as the opportunities in this market. Mitch and Geoffrey, said: “Although the sector is often viewed as defensive and non-cyclical, hospitals in the US are facing a structural, secular shift. US healthcare spend per capita is the third highest in the world, at around 18% of annual GDP. However, by most metrics the quality of healthcare in the US is not viewed as commensurate with this level of spending. As such, scrutiny of insurers and patients’ demands for lower costs have driven a move away from the fee-for-service model that healthcare providers are familiar with to a model that demands value and quality in exchange for payment.”
  • May 17, 2017
    Fixed Income
    Victoria’s secret opportunity
    Mitch Reznick, CFA
    Business has been tough for US retailers, resulting in weak performance across the sector. However, excessive selling off in the sector has provided some opportunities for investors to gain exposure to attractively-valued companies with effective strategies for adapting to change. Mitch Reznick, Co-head of Credit, and Ilana Elbim, Credit Analyst, select L Brands, home of Victoria’s Secret, as an attractive opportunity in the US retail space. Challenging conditions: priced in, or leading to overselling? Despite a supportive US economy, with improving macroeconomic data and rising consumer confidence, retailers have suffered. This is primarily due to secular changes in the industry, which include: consumers’ growing preference for experiences instead of clothing, declining tourist numbers (and therefore holiday shoppers), unseasonal weather, and increasing competition from e-commerce pure players such as Amazon.
  • New research shows relationship between ESG factors and credit spreads
    Mitch Reznick, CFA
    Hermes Investment Management, the £28.5 billion manager committed to delivering holistic returns – outcomes for its clients that go far beyond the financial, has today published research by its Credit and stewardship teams demonstrating the impact of ESG (environmental, social and governance) factors on credit spreads, and developed a pricing model to capture the influence of these factors on credit instruments.
  • April 18, 2017
    Equities
    Pricing ESG risk in credit markets
    Mitch Reznick, CFA
    There is plenty of evidence showing that companies with poor environmental, social and governance (ESG) behaviours are likely to underperform their peers. Our research has historically included ESG analysis alongside assessments of a firm’s operating and financial risks. Until now, it has been challenging to price ESG risks in a similar way to these core credit risks. But this is changing: in order to analyse ESG risks with greater precision, we have developed a pricing model to capture the influence of these factors on credit instruments.