Niche high yield strategy

  • Laser-focus on short duration bonds to lower volatility and to insulate the portfolio from the effects of interest rate changes and inflation
  • Emphasis on under-followed, smaller issues to further reduce volatility and increase yield while decreasing default risk
  • Niche ignored by larger institutional buyers, creating additional 400 basis point yield advantage
  • Natural liquidity through calls, tenders, and maturities
  • A high reinvestment rate that provides the flexibility to adapt to changing market conditions
  • Diversification across a large number of industries and markets, including stub debt, convertible bonds, and European and Canadian issues

The Russell 2000 hedge

  • Short of the IWM, the ETF of the Russell 2000
  • IWM has 3 times the relative volatility of our short duration high yield portfolio
  • Transparency and liquidity with low carrying cost
  • Significant correlation with the high yield bond portfolio, especially in down markets
  • Short small cap equity exposure to closely match the small issue high yield profile of the long portfolio

Manager experience

  • Execution of this strategy for a combined 30 years
  • Ability to source these bonds through a network of secondary market high yield brokers
  • Operational restructuring experience in running companies and serving on boards of directors to complement portfolio management experience