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UNCONSTRAINED CREDIT

A dynamic multi-sector credit solution throughout market cycles

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By combining unconstrained credit, high-conviction credit selection with a hedge against adverse market conditions, we aim to maximise long-term total returns.

Andrew Jackson & Fraser Lundie

Co-Lead Portfolio Managers

Unconstrained

Unconstrained, high-conviction investment across the global liquid credit spectrum.

Superior relative value

Capturing superior relative value throughout credit markets as investment conditions change.

Credit expertise

Outsource credit-allocation decisions to a team of skilled, experienced global credit investors operating within a robust governance framework.

Alpha generation

Alpha generation through issuer and security selection: sourcing high-conviction, bottom-up ideas globally and throughout corporate capital structures.

Optimal convexity

Optimal convexity through an options overlay: aiming to protect return-seeking investments from perceived market and macro risks.

ESG integration

ESG integration and engagement ensures responsibility is embedded in every investment decision.

Hermes Unconstrained Credit strategy

  • Top-down oversight

    Applying expertise from across the credit spectrum, the Multi Asset Credit Investment Committee (MACIC) determines top-down, dynamic credit allocations throughout market cycles.

  • Bottom-up skill

    Through fundamental credit analysis, we identify issuers that drive returns in each credit market before searching their capital structures for the most attractive instruments.

  • Downside defence

    High-conviction, bottom-up positions in liquid-credit markets are shielded using simple index options to hedge against down markets.

  • Full spectrum

    Unrestricted by security type or geographical silos, we exploit opportunities in developed and emerging markets for investment-grade and high-yield corporate bonds, credit default swaps, loans, asset-backed securities, government securities and other credit derivatives.

Pricing ESG risk in credit markets

There is plenty of evidence showing that poor environmental, social, and governance (ESG) behaviours can lead to the erosion of a firm’s enterprise value. This has implications for both equity and credit investors. As a result, our investment analysis has historically considered ESG risks alongside more traditional operating and financial risks. However, until now it has been challenging to price ESG risks in a similar way to these core credit risks. 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. Read more here.

Hermes Unconstrained Credit - Introduction to strategy

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