European - European High Yield Fixed Income Management
This product is designed for investors who are looking for exposure to the European high yield corporate bond market. While relatively new for Europe this market segment is now well established.
The product mainly invests in Euro-denominated corporate bonds with sub-investment grade rating. From time to time Sterling-denominated issues by European issuers may be held, with the currency exposure hedged back into Euros. Moreover positions in investment grade paper, trading at high yield levels, will occasionally be found in the fund.
For a specific portfolio the universe can be limited in agreement with the investor.
Consistent outperformance of the Merrill Lynch Euro High Yield (constrained) index over rolling three year periods. The index limits the exposure to an individual issuer to 3% and therefore is sufficiently diversified on the individual issuer level.
In a more conservative version we offer the product as an absolute return fund.
We use a disciplined team based approach which is bottom-up oriented. Our sources of value-added are:
- fundamental company research
- portfolio construction, supported by a quantitative tool
- sell discipline
Fundamental research is our primary source of value added. An important tool we use in our issuer research is a financial model of the company which allows consistent projections of P&L, cash flow and balance sheet indicators and gives answers to key questions like: how realistic is the company´s financial plan and when will it need additional financing? Different scenarios can easily be run and swift reaction to company specific news is possible.
Portfolio construction is conducted bottom up, enhanced by some sector adjustments.
The size of a position is determined by the result of the credit analysis - in accounts managed versus the benchmark the holding in the latter plays a role, too. The weighting may then be adjusted considering relative value, liquidity and the "rating" by a quantitative model (Moody´s KMV), which - if below our assessment - results in a reduction of the holding. Finally we check whether the resulting sector structure of the fund is in line with our overall assessment of sectors or whether there is need for some further adjustments.
We constantly monitor our portfolios and regularly check whether the actual development of the issuers is in line with our projections made during the research process.
Investment Team
The team is based in Düsseldorf and is part of our European Fixed Income team capacity. It works in close co-operation with the Euroland investment grade credit team and the European equity team and the US high yield team.
Product Options
The product is offered as a separate account and as a pooled investment vehicle.
In addition to these funds the high yield team manages the high yield segments of the "Euro Corporate plus" funds, the Global High Yield funds and other accounts with high yield components.