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Your Questions Answered by Unconstrained Credit

28 July 2021 |
Active ESG
Your Questions Answered: a quarterly Q&A series featuring the top 10 questions that clients and prospective clients ask our investment teams.

How does Unconstrained Credit differ from other flexible credit solutions? How much/little risk do we take? Why do we use options? These are just a couple of the most commonly asked questions about our Unconstrained Credit strategy by our clients and prospective investors.

Earlier this month, we sat down with our Fixed Income team as they tackled the most pressing questions about our Unconstrained Credit capability.

1. How is our Unconstrained Credit strategy different to other flexible credit solutions?
2. How much/little risk can you take?
3. How do you manage the derivative overlay to provide downside protection for the long book?
4. How has the strategy performed during the coronavirus pandemic – and what role did options/hedges play?
5. How do you manage duration and inflation risks within the portfolio?
6. How liquid is the portfolio?
7. What makes Unconstrained Credit a high-conviction strategy?
8. How does Unconstrained Credit express its ESG convictions?
9. Is the strategy a good complement to other flexible credit/bond strategies?
10. What should we expect in terms of performance?

Your Questions Answered by Unconstrained Credit


Risk profile

  • Past performance is not a reliable indicator of future results.
  • The value of investments and income from them may go down as well as up, and you may not get back the original amount invested.
  • Targets cannot be guaranteed.
  • It should be noted that any investments overseas may be affected by currency exchange rates.
  • This information does not constitute a solicitation or offer to any person to buy or sell any related securities or financial instruments.
  • Where the strategy invests in debt instruments (such as bonds) there is a risk that the entity who issues the contract will not be able to repay the debt or to pay the interest on the debt. If this happens then the value of the strategy may vary sharply and may result in loss. The strategy makes extensive use of Financial Derivative Instruments (FDIs), the value of which depends on the performance of an underlying asset. Small changes in the price of that asset may cause larger changes in the value of the FDIs, increasing either potential gain or loss.

1Hermes Unconstrained Credit Strategy does not have a benchmark for performance purposes. The risk-free rate – currently Libor – is given for illustrative purposes only.

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