High Yield Bonds
S.T & N.O.A
1 - 5 YEARS
6 - 10 YEARS
11 - 20 YEARS
21 - 30 YEARS
31 + YEARS

Credit Quality Distribution as of 03/31/2016

Not Rated

Portfolio Details as of 03/31/2016

Total Net Assets
$601.79 M
Number of Issues
Average Coupon
Average Maturity
7.48 Years

Portfolio Positioning as of 03/31/2016

  • The broad convertible market experienced a volatile start to the year, with convertible securities and their underlying equities posting negative returns for the quarter, despite rallying sharply in the second half of first quarter 2016. This increased volatility provided opportunities to invest tactically during the period. In particular, we believe the outlook for the energy sector has improved, especially for those firms that have reduced their cap-ex budgets and have divested their non-core businesses in response to the low commodity-price environment. As such, we selectively increased the portfolio’s energy exposure during the second half of the period, focusing on high-quality, low-cost producers with robust balance sheets.
  • As credit spreads tightened and equities rebounded in late February and March, we increased the portfolio’s exposure to the industrials sector. We believe this sector may realize improved earnings and margins going forward, with an emphasis on segments of the industrials sector that are poised to benefit from strengthening commodity prices and a potentially weaker dollar.
  • During the quarter, we reduced the portfolio’s allocation to the information technology sector. Many companies maintain lofty valuations, which, coupled with difficult revenue growth comparisons to the prior year, could make it difficult for firms to achieve results that will exceed investors’ expectations. As such, we believe many firms in this sector may be currently overvalued.
  • As equities slumped in the first half of the quarter, the portfolio’s delta was materially lower than the benchmark’s delta, reflective of the defensive positioning of the portfolio. Beginning in late February, we began increasing the portfolio’s delta to take advantage of rallying equity prices, and now we currently maintain a delta above the benchmark’s delta. 
  • Domestic convertible issuance was particularly weak to begin 2016, due to the increased volatility in the markets. We believe that the combination of a dovish U.S. Federal Reserve and recovering equity valuations could spark a resurgence in convertible issuance, with favorable terms for investors. 
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