Key characteristics: • Differentiated research framework • Business cycle-based investment approach • Experienced team, consistent process
High Yield Overview
Aegon AM US high yield strategies are managed with a time-tested investment approach, the benefits of which are evident in their consistent relative long-term performance, risk-adjusted returns and results in down markets.
Our flagship High Yield Fixed Income strategy launched more than two decades ago. Since then, the firm has introduced several US and global high yield strategies to meet a variety of outcomes. The strategies are managed with a relative value-oriented and opportunistic total return style.
Aegon AM US High Yield Strategies
|High Yield Fixed Income||$7,726 million||June 1, 1997|
|Short Duration High Yield||$44 million||January 1, 2017|
|High Yield Select||$53 million||October 1, 2017|
|Global High Yield||$141 million||October 1, 2015|
*As of September 30, 2018
High yield portfolios are managed acording to three main guiding principles. We believe:
- Security selection is the primary driver of return. Therefore, we have developed a broad research platform with dedicated global credit and distressed debt teams.
- Unexpected changes in business cycles create the biggest market dislocations. As such, the strategies are top-down aware, consider the house macro view and hold thematic views on credit markets. This supports efforts to manage risk and sector exposures positioning around inflection points.
- Broad diversification mitigates risks associated with individual credits. Consistent with this sentiment, we manage the high yield strategies’ liquidity and risk profile. The portfolio is also diversified across a number of issues, industries and credit quality.
The high yield strategies employ a fundamental, bottom-up credit research investment process, which is complemented by proprietary top-down macroeconomic analysis and risk monitoring. This disciplined bottom-up approach emphasizes the analysis of fundamentals, valuation, sentiment and technicals.
The High Yield team’s research team structure, long-term investment focus, and risk-informed process differentiate its high yield strategies from peers, specifically in the following three key areas:
- Seasoned, cross-coverage credit research team and dedicated distressed research capability: The traditional credit research team is structured for analysts to cover companies across the credit spectrum, from investment grade to high yield. This approach provides consistent research coverage of a credit when rating transitions occur. The research team’s cross-coverage structure allows analysts to potentially identify opportunities to take advantage of dislocations that may occur as fallen angels leave the investment grade market. Unlike many traditional high yield managers, the firm has a dedicated Distressed Research team. This research team possesses a thorough understanding of corporate restructurings and has extensive experience leading creditor groups through highly complex bankruptcies. Distressed research analysts have experience identifying and analyzing undervalued and overvalued securities in stressed and distressed situations. High yield portfolio managers can draw on the team’s expertise to help to mitigate risk in existing holdings and uncover attractive opportunities.
- Business cycle-informed portfolio management approach: The High Yield team believes unexpected changes in business cycles create market dislocations and potential investment opportunities. Portfolio managers incorporate insight from the firm’s top-down global house view process in an attempt to anticipate market inflection points, adjusting business cycle assumptions in partnership with the research team to identify emerging investment opportunities. The team’s willingness to play in all parts of the high yield market, from defensive to aggressive sectors and structures, may afford them the ability to capitalize on these market dislocations.
- Experienced team, consistent process and risk-focused mindset: The portfolio management team has experience navigating business and credit cycles with an acute focus on risk management. Adhering to a disciplined and repeatable process, the team uses their experience, combined with a risk-focused mindset, to navigate market dislocations in pursuit of competitive risk-adjusted returns. The team collaborates with research analysts, other portfolio managers and risk analysts to assess downside risk, identify potential causes and implications, and factor this information into the investment decision-making process.