Key characteristics: • Business cycle-based investment approach • Deep bankruptcy and restructuring experience • Broad research capabilities, global perspective
Credit Opportunities Overview
Unexpected changes in business cycles create market dislocations and potential investment opportunities. Using a time-tested investment process, and leveraging the expertise of a dedicated Distressed Research team, the Credit Opportunities strategies attempt to capitalize on such dislocations to provide competitive risk-adjusted returns over full market cycles in high conviction positions.
Aegon AM US Credit Opportunities Strategies
|Credit Opportunities – Long Only||$144 million||April 1, 2005|
|Credit Opportunities - Long Biased||$140 million||May 1, 2013|
*As of December 31, 2018
- High-conviction strategies that seek to produce idiosyncratic and differentiated returns by investing in 30-40 issuers
- Invests in high yield, bank loans, stressed/distressed securities, and special situations with opportunistic allocations to emerging markets debt, structured credit and closed-end funds
- Nimble approach that adapts to business and credit cycles by investing in fixed and floating rate securities across the capital structure
- Experienced team has worked together for over 10 years with extensive credit and restructuring expertise
The Credit Opportunities investment philosophy is predicated on the following beliefs:
- Prices of lower quality and distressed securities are inefficient. Leveraging the team's extensive restructuring experience and applying specialized distressed research allow the portfolio managers to identify potential price deviations from fair value.
- Opportunistic allocations across multiple asset classes leads to a unique portfolio. The strategies seek the most attractive investment opportunities across companies’ capital structures.
- Fluctuations in business cycles drive returns in fixed income markets. The strategies seek to benefit from strategic and tactical rotations between performing and stressed/distressed credits, depending on business cycle conditions and valuations.
The Credit Opportunities strategies use a fundamental, value-driven approach to invest in stressed, distressed and defaulted securities. Portfolio managers search for under- and overvalued situations across a broad range of asset classes, industries and companies. The strategies are flexible, moving up and down the ratings spectrum and across asset classes while adapting to market fluctuations as well as changes in business and credit cycles.
In lower default environments, the team evaluates the entire capital structure of stressed, distressed or lower quality credits to determine which securities, if any, offer compelling, risk-adjusted return potential. In higher default environments, the team members identify attractive investment opportunities by leveraging their extensive bankruptcy and restructuring expertise as well as their ability to assess trigger events and value distressed assets.
The strategies have historically benefited from their business cycle-based approach, the team’s experience and the research team structure.
- Business cycle-based investment approach. Bond markets are inefficient and will deviate from fair value. The Credit Opportunities strategies seek to take advantage of these inefficiencies throughout the business cycle to provide competitive risk-adjusted returns. The team focuses on rigorous credit selection and trading discipline in low-default environments and fundamental valuation, liquidation, and recovery analyses in high-default environments.
- Deep bankruptcy and restructuring experience. The strategy’s portfolio managers have worked together for ten years. The team has extensive experience leading creditor groups through highly complex bankruptcies and restructurings, which can enable them to effectuate desired outcomes. This experience also aids their ability to evaluate downside scenarios and identify sources of value.
- Broad research capabilities, global perspective. The firm’s research team structure fosters a collaborative environment and comprehensive coverage corporate, sovereign, structured, and distressed fixed income classes worldwide. This research allows the credit opportunities team to consider each credit from a broader, global perspective.