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Unconstrained Credit

Home / Unconstrained Credit

Dynamic multi-sector credit investing throughout market cycles

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

Andrew Jackson & Fraser Lundie

Co-Managers

Why Hermes Unconstrained Credit?

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Unconstrained
, high-conviction investment across the global liquid credit spectrum.
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Capturing superior relative value
throughout credit markets as investment conditions change.
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Outsource credit-allocation decisions
to a team of skilled, experienced global credit investors operating within a robust governance framework.
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Alpha generation
through issuer and security selection: sourcing high-conviction, bottom-up ideas globally and throughout corporate capital structures.
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Optimal convexity
through an options overlay: aiming to protect return-seeking investments from perceived market and macro risks.
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ESG integration
and engagement ensures responsibility is embedded in every investment decision.

 

Video: Hermes Unconstrained Credit Strategy

Key features

  • Top-down oversight

    The Multi Asset Credit Investment Committee meets every month and determines top-down, dynamic credit allocations throughout market cycles.

  • Bottom-up skill

    Bottom-up credit selection is implemented through intensive fundamental credit analysis that includes pricing in ESG risks.

  • Downside defence

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

  • Full spectrum

    The strategy aims to exploit opportunities in developed and emerging markets, corporate and government bonds, derivatives, asset-backed securities and credit-index options.

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.

Podcast: Why now is the time for an unconstrained approach

Topics covered:

  • How has Hermes Unconstrained Credit been constructed to adapt to the current environment
  • Portfolio managers' professional backgrounds
  • Key differentiators
  • Target returns