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  • 08/07/2019
    Fixed Income
    Andrew Jackson
    One year on from its launch, we ask: how has Hermes Unconstrained Credit performed?
  • 30/05/2019
    Fixed Income
    Fraser Lundie
    As the Multi-Strategy Credit hits a key milestone in June, Fraser Lundie, Head of Hermes Credit, looks back on how the strategy has fared in challenging markets since inception.
  • 22/02/2019
    Fixed Income
    Fraser Lundie
    Fraser Lundie, Head of Hermes Credit, introduces the Unconstrained Credit investment process. The strategy provides unconstrained, high-conviction investments across global credit, designed to capture superior relative value.
  • 21/02/2019
    Fixed Income
    Fraser Lundie
    Fraser Lundie, Head of Hermes Credit, introduces the Unconstrained Credit strategy, which provides unconstrained, high-conviction investments across global credit, designed to capture superior relative value.
  • 12/12/2018
    Fixed Income
    Fraser Lundie
    Disruption is changing the face of many industries: electric and autonomous vehicles are threatening traditional car manufacturers, while the penetration of ecommerce is transforming consumer services. In this issue of Spectrum, we explore how a wave of disruptive change has impacted the composition of global equity markets more severely than the high-yield bond market. We also explain the importance of active high-yield allocation to a risk-balanced portfolio in an investment landscape that is increasingly being upended by technological progress and business-model disruptions.
  • 25/11/2018
    Fixed Income
    Fraser Lundie
    Hermes Investment Management, the $46.9 billion manager, has announced the appointment of Nachu Chockalingam as Senior Emerging Market Debt Portfolio Manager. Based in London, Nachu reports into Fraser Lundie, Co-Head of Credit. The appointment is representative of the firm’s approach to providing current and prospective clients with access to all areas of global credit markets. Nachu will help manage the performance and risk of existing emerging market allocations across all liquid credit strategies. This includes the Hermes Unconstrained Credit Fund, which was launched in May 2018 and has since raised $386 million[1].
  • 17/09/2018
    Fixed Income
    Fraser Lundie
    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.
  • 05/09/2018
    Fixed Income
    Fraser Lundie
    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, we 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.
  • 25/06/2018
    Fixed Income
    Fraser Lundie
    As the Hermes Global High Yield, Global Investment Grade, Multi-Strategy and Absolute Return Credit strategies hit key milestones, Fraser Lundie CFA, Co-Head of Credit at Hermes Investment Management, explains how a rigorous investment process has allowed them to weather volatile storms. Marking new milestones This month, our Global High Yield Credit, Multi-Strategy Credit and Absolute Return Credit capabilities mark their eight-, five- and three-year anniversaries, respectively and in July, our Global Investment Grade Strategy will celebrate its eight-year anniversary. These four strategies have the following aims: 1. Global High Yield Credit: generate a high level of income by investing primarily in a diversified portfolio of high-yield bonds. Since its May 2010 inception, it has consistently delivered top-quartile return.
  • 20/06/2018
    Fixed Income
    Fraser Lundie
    As our Global High Yield, Global Investment Grade, Multi-Strategy and Absolute Return Credit strategies hit key milestones in June, we assess how they have performed since inception. The strong performance of our diversified range of high-conviction strategies since their inception has been driven by our dynamic approach to global credit: we focus on relative-value investing across the capital structures of issuers worldwide. This has resulted in an impressive track record of outperformance through market cycles (see Figure 1). To achieve this, we employ one investment process across our suite of strategies. It combines top-down allocation across the global liquid-credit spectrum with bottom-up, high-conviction security selection enhanced by ESG analysis.
  • 30/05/2018
    Fixed Income
    Andrew Jackson
    Hermes Investment Management, the £33.6 billion manager, has today added to its global fixed income product offering with the launch of the Hermes Unconstrained Credit Fund. The UCITS Fund, seeded by cornerstone investors including Quilter Multi-Asset, has investor commitments of £185m and aims to offer a high-conviction, multi-sector credit solution that is structured to perform throughout market cycles. The investment process combines top-down allocation across the global liquid-credit spectrum with bottom-up, high-conviction security selection. This is complemented by an options overlay to manage risks within the prevailing market environment. Andrew Jackson, Head of Fixed Income, and Fraser Lundie, Co-Head of Credit and Lead Credit Portfolio Manager, will manage the Fund and look to exploit opportunities throughout the global liquid credit spectrum in investment-grade and high-yield bonds, loans, credit-default swaps, asset-backed securities and other credit derivatives. Through assessing credit risk appetite across liquid-credit markets, the Multi-Asset Credit Investment Committee will provide allocation guidance, with bottom-up credit selection, implemented following intensive fundamental credit analysis that includes pricing in ESG risks. The options overlay will hedge high-conviction positions by mitigating the impact of any broad-based material deterioration in credit markets.
  • 14/09/2017
    Fixed Income
    Fraser Lundie
    An improbable level of calm in markets has compelled investors to capitalise on low levels of volatility. Here we assess why they should actively manage risks in high-yield credit. It is important to look beyond the headline indicators of risk. Stubbornly low yields and low volatility in recent years have compelled yield-seeking investors to increase their allocations to high-yield bonds. This year the volatility of high-yield credit has fallen below that of investment-grade credit (see Figure 1). But there is no reason to believe that low volatility is the new normal. Even though market conditions are stable, investors should appreciate the latent risks.