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ABSOLUTE RETURN CREDIT

Aiming to achieve absolute return regardless of wider market circumstances, across asset classes and geographies.

Our disciplined and robust process, attention to risk management, independent research and integrated team approach are all vital components.

Fraser Lundie

Head of Hermes Credit

Directionless alpha generation

Our global, multi-strategy, relative-value approach aims to generate risk-adjusted alpha.

Diversification

Not constrained by traditional corporate bond benchmarks, we can mitigate risk by investing across regions.

Flexibility

Investing in long and short positions across a broad range of liquid securities.

Investing worldwide

Our security selection driven by the same intensive, bottom-up analysis that underpins all of our credit strategies.

Liquid and transparent

Investing purely in bonds, credit-default swaps and loans.

Experienced team

Skilled, integrated team whose principal members have worked together since 2004.

Investment process

We apply the same global, relative-value approach that drives our high-yield and multi-strategy credit products. This strategy, however, is less concentrated, and through long and short positions we aim to provide a highly diversified and liquid portfolio that delivers consistent market-neutral returns.

Investment approach

We believe that global, relative-value investing throughout the capital structures of issuers can deliver strong returns through the cycle.

Through top-down analysis, we determine our risk appetite and the return prospects of different regions and sectors. These findings direct our disciplined, bottom-up research, in which we seek exposure to issuers with attractive credit risks and aim to determine which securities in their capital structures provide superior relative value.

Our global approach, in which we invest throughout the US, Europe and the emerging markets, provides us with access to an expansive set of opportunities and sources of liquidity.

Targets cannot be guaranteed.

Team

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US homebuilders - on strong foundations? US homebuilders have been hurt this year by concerns that rising interest rates could keep buyers at bay. But, as the sector continues to report strong demand for new housing, Fraser Lundie, Co-Head of Credit and Anna Chong, Credit Analyst, Hermes Investment Management ask: is the backdrop for US homebuilders favourable? The recent rise in interest rates – coupled with expectations of further rate hikes from the US Federal Reserve – has weighed heavily on US homebuilders this year: investors fear higher mortgage rates will weaken demand. But despite talk of a slowdown, industry fundamentals are still supportive of US homebuilders. Strength in the economy and labour market have boosted demand for housing. In Q2, US economic growth enjoyed its best performance in almost four years, increasing at an annualised rate of 4.2%, while unemployment remains low at 3.9% and job creation is solid. In July, employers added 157,000 jobs. Moreover, homebuilders’ recent robust earnings results demonstrate that demand has not been impacted by rising mortgage rates, with many reporting strong orders – an indicator of future revenue for homebuilders. Tight existing home inventory should also spur demand for new builds. Meanwhile, in a post-earnings call with analysts last month, Toll Brothers’ Chief Executive Douglas Yearley pointed to a structural shift towards the new-home industry – with buyers wanting to “create a one-of-a-kind custom home” rather than live in existing homes.

Sales Contacts

Douglas Anderson, Director - Consultant Relations
James Lucas, Director - UK Institutional Business Development
Mark Miller, Head of UK & MENA Institutional