While many investors seeking high income will find it in the bonds of more risky companies or more risky countries, we invest in safer companies. We will invest lower down the capital structure to obtain a higher yield.
By participating in junior or subordinated issues of quality companies, we can obtain the higher yields on offer, for the same company default risk.
This strategy allows the investment management team to capitalize on their specialist skills. The team focuses on credits with the best risk/reward profile across sectors and market cycles, without the constraint of a benchmark. Specifically, the team has the required experience and expertise in the financial sector and niche areas, such as undated, floating rate, and fixed-to-floater debt instruments, to access overlooked and often undervalued issues in the market. This enables them to obtain the higher yields often attached to junior or subordinated issues, or those with more complex features, as well as capturing capital appreciation as the bonds realize their true value.
Many investors are not prepared to spend the time, or simply lack the skills required to evaluate prospectuses accurately, thus providing a steady source of inefficiencies. There are excellent opportunities for potentially strong risk-adjusted returns.