Unconstrained Credit

Reasons to invest

Unconstrained

With the ability to invest across the full spectrum of liquid credit globally, we aim to achieve a high level of income and capital growth.

Combining top-down/bottom-up

We seek to generate alpha by combining top-down asset allocation with bottom-up issuer and security selection.

Downside defence

We employ a dynamic hedge overlay which seeks to protect against down markets.

Experienced team

A skilled, integrated team with a strong record of implementing relative-value credit strategies since 2004.

ESG integration

Our investment process incorporates Federated Hermes’ leading ESG integration and engagement insights.

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Why Unconstrained Credit?

Potential for strong risk-adjusted returns

Targeting high income

Aiming for downside defence

Lower volatility credit can offer superior risk-adjusted returns against equities. Although high economic growth is desirable, credit can thrive in a low-growth environment given companies’ focus on balance-sheet health, leading to excellent fundamentals and low default rates.

Approaching credit in the right way is more important than ever. Through our global and unconstrained approach, we aim to achieve a high level of income and capital growth.

The process incorporates a dynamic option overlay which seeks to hedge against down markets and manage risk. It is intended to allow us to adjust the portfolio risk depending on prevailing market conditions while limiting turnover of our best ideas. The reduced volatility also contributes to the potential for strong risk-adjusted returns.

How we invest

Identifying sources of risk and opportunity

Disciplined bottom-up research

ESG integration and engagement

We believe it is vital to incorporate ESG analysis into the investment process to mitigate risk and improve returns. Companies with poor ESG behaviours have been shown to be at greater risk of underperforming. We consider ESG in our investment decisions for each security and we also analyse portfolio-level ESG risk. We use our leading engagement team, EOS at Federated Hermes, to engage with investee companies. Outcomes include greater transparency, improved behaviours and reduced uncertainty and risk.

Investment philosophy

Active, high-conviction global relative value across capital structures

We believe:

Seamless integration of ESG and sustainability considerations, coupled with active engagement, is critical to sustainable long-term performance.
A high-conviction, active credit-selection process, guided by top-down analysis is essential to outperforming in both bull and bear markets.
Issuer selection universe beyond the US and Europe, including emerging markets, can create more opportunities and diversified sources of return.
Security selection is as important as company selection, searching capital structures for optimal instruments opens opportunities.
Downside defence improves risk-adjusted returns – we seek to preserve capital in down market environments.