Our fixed income investment approach is built around a globally integrated, research-driven process. We believe that bond portfolios managed by a globally-integrated fixed income team within a disciplined, risk-controlled framework may produce strong risk-adjusted returns. We seek to add value in three ways: we draw upon the expertise of locally based sector specialists and portfolio management teams; we utilize internally generated fundamental, quantitative and technical research; and we allocate risk using a rigorous and methodical portfolio construction process. We target diversified sources of portfolio returns and do not rely on any single strategy.
We employ a disciplined and systematic process to evaluate and identify attractive fixed income investment opportunities. The Sterling Corporate Bond strategy is managed by the Global Investment Grade Credit Team and follows our global credit investment process, which has three key components: macro credit strategy, to determine the credit bias of portfolios; sector strategy, to determine the sector weightings of portfolios; and security strategy, to score the investable universe of researched issuers for inclusion in our portfolios.
Macro credit strategy
Our macro credit strategy process begins with a monthly strategy meeting in which our portfolio managers, analysts and traders evaluate fundamental, technical and valuation factors that determine the direction of credit spreads. In advance of the meeting, regional teams in the U.S. and Europe produce scorecards that assign scores to the various fundamental, technical and valuation factors. Each factor is assigned a score, and the averaged scores are weighted equally and summed. This helps drive the credit bias of our portfolios (more or less beta).
Also influencing our credit strategy are the quarterly macro themes established by the broader fixed income team. These themes guide our investment decisions, setting out our firm-wide views on interest rates and various sectors across the fixed income spectrum.
The second component of our process is sector strategy. In this component, portfolio managers, analysts and traders work together to determine sector weightings consistent with our macro credit strategy. The process blends a top-down approach that factors in the broad market and the relative value judgments of portfolio managers and traders, with bottom-up fundamental analysis of companies by our respective sector analysts.
Each week portfolio managers, analysts and traders have credit research meetings to discuss a featured sector. The sector analyst will provide a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). The goal of the sector review is to validate our current ratings and to develop specific trade ideas related to issuers in that sector in conjunction with the portfolio managers and traders.
The third component of our process, security strategy, focuses on scoring the investable universe of issuers. Analysts are responsible for evaluating the credit metrics of companies in their sectors and determining if valuations are reflective of their value assessment. We assess each company’s fundamental credit quality, as well as reviewing the competitive environment, event risk and technical factors
Our analysts assign a single ranking to each issuer in the universe; the ranking is designed to provide the analysts’ view of how that particular issuer will perform relative to other issuers in the sector. This helps the portfolio manager select specific securities for the portfolios.