Global High Yield Credit

Reasons to invest

Compelling yield

We pursue a high level of income by investing in below-investment-grade corporate bonds.

Global approach

By expanding the universe beyond the two largest high yield markets of the US and Europe, we create more opportunities.

Relative value

Focusing on security selection rather than issuer selection alone, we are able to exploit the differences in relative value among bonds, loans and derivatives.

Risk aware

A thorough risk management process provides the best opportunity to avoid negative credit events and to convert valuation anomalies into alpha.

ESG integration

The team utilises external and proprietary ESG data and research – along with Federated Hermes’ leading stewardship resources – to mitigate risk and discover new opportunities.

Quick links

Strategy overview

Investing worldwide, we exploit differences in relative value throughout issuers’
capital structures aiming to outperform through the cycle.

Fraser Lundie, CFA

- Head of Fixed Income - Public Markets

Why Global High Yield Credit?

Potential for strong risk-adjusted returns

High income in a low-rate world

Diversification benefit

Lower volatility credit can potentially offer superior risk-adjusted returns against equities. Although high economic growth is desirable, credit can thrive in a low-growth environment – given companies’ focus on balance sheet health – leading to excellent fundamentals and low default rates.

Investors continue to search for income. In the current environment, there are many expensive valuations and negative-yielding assets. Therefore, approaching credit in the right way is more important than ever. Through our global, relative value approach, we aim to achieve a high level of income.

The global high yield market can provide compelling diversification as part of a broader portfolio of assets, given its low correlation to equities.

How we invest

Top-down assessment

Our investible universe is part of the $10tn global hard-currency debt market; it is the portion that the Credit team deems suitable for investment purposes. The investment process begins with the bi-monthly Credit Strategy Meeting (CSM), during which the team reviews various drivers of credit markets and assesses relative value to identify new investment opportunities. We define our overall risk appetite and produce scores that guide the portfolio manager on where to allocate risk across geographies, sectors, curve position and credit quality.

Bottom-up credit selection

ESG analysis

The sustainable fixed income team generates its own sustainability scores. Each of these sustainability scores is factored into the ESG Score assigned for each issuer as part of our integrated ESG approach. We use a proprietary pricing model to capture the influence of ESG factors on credit spreads. This enables us to calculate the marginal price of the ESG risk for each issuer and anticipate changes in valuation.

Investment Philosophy

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

Investment process

Team

4773, 4812, 4723

Product Information

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Insights

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Sustainability

EOS Stewardship

A dynamic approach to global high yield