Focused on finding value within inefficient parts of the high yield market
The Concise Edge
We utilize a non-correlated short term, under-followed, high yield investment strategy
Short term, Under-followed High Yield
Concise Capital is focused on finding value in an inefficient part of the high yield bond market. The result is a portfolio that generates high current income while minimizing credit risk, lowering volatility, and adding diversification.
We look for value in underfollowed, tradeable high yield issues that turn into cash within three years.
The short duration lowers interest rate and default risk while maximizing return, making the strategy more defensive and less volatile than the overall high yield market.
The average maturity of portfolio holdings is two to three years. Interest income produces most of the portfolio return with no leverage. We favor bonds of small and mid-cap issuers primarily in the U.S., but also in Canada, Europe, and Australia because they are less researched and more inefficiently priced when compared to larger issues.
We respect capital and focus on risk management. The portfolio is well-diversified across individual positions and industries.
To further reduce volatility, we employ a hedging strategy using a liquid ETF, which tracks the Russell 2000. The ETF has proven to be highly correlated to the high yield bond market, particularly during market drops.
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
• 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