Exposure to the team’s best long-only credit investments, combined with strategies that defend against market volatility, should generate positive absolute returns through the cycle. In seeking to achieve this, the fund is split into two Multi-Strategy Credit buckets:
- Best selection: high-conviction, long-only investments in corporate bonds, loans, convertible bonds and derivatives comprising two-thirds of the portfolio.
- Defensive: a range of bearish strategies, accounting for one-third of the portfolio, that aim to defend against market falls.
Identifying outperforming credit investments requires a broad mandate. The team researches the US, Europe and the emerging markets to exploit differences in the valuation and return prospects of securities.
Crucially, this universe enables them to avoid chronically overvalued sectors and access better liquidity.
Finding a good credit name, however, is not enough. The team believes that security selection is equally as important as issuer selection, given the varying risks and return potential of different securities within each issuer’s capital structure. Exploiting such relative value is core to generating positive returns.
Defensive trades, which include outright short, curve and capital structure trades, aim to defend the portfolio’s performance in down markets.