GLG Sterling Corporate Bond
A long-only corporate bond strategy with a focus on Sterling denominated bonds, employing what the team believes is a differentiated bottom-up driven approach with multiple drivers of expected returns.
- The strategy aims to provide income and capital growth by outperforming the ICE BofA Sterling Corporate & Collateralized Index1 and invests in fixed and floating rate securities issued by UK companies and non-UK companies.
- The strategy is managed by Jonathan Golan who is the lead PM, a multi-award-winning manager with a established track record of managing credit strategies for over 8 years.
- A flexible approach, investing across geographies and different sectors, allowing the strategy to benefit from the team’s best ideas, whilst ensuring diversification.
- Fundamentally driven approach, with multiple criteria to select individual bonds focusing on bonds where the yield greatly overstates the default risk.
1. The ICE BofA Sterling Corporate & Collateralized Index is an official benchmark for this strategy.
Approach
The investment approach has three pillars:
- Margin of Safety: The team works relentlessly to identify undervalued individual securities from a bottom-up perspective. That is, only buying bonds where the yield greatly overstates the default risk. The team assesses the default risk by undertaking rigorous credit research, combing through the financials line by line, focusing on cash generation, rather than adjusted earnings.
- Alpha not Beta: Each company in the portfolio has an individual credit improvement story, which is typically uncorrelated to the macro or the rates cycle. These bonds tend to be less correlated to one another and the broader market. The result is that we aim to outperform1 in both rising and falling markets, due to multiple uncorrelated drivers of risk and return.
- Small is Beautiful: The team has an unwavering belief that small is beautiful. Whilst the investment grade market is hugely diversified, it is also concentrated (10% of the number of issuers account for more than 50% of the index1). Large issuers tend to have worse risk/reward, because they typically have higher leverage and a lower yield. Therefore, we focus our time analysing small and medium sized issuers which are less well researched and can often offer attractive expected returns relative to credit risk. Small Investment Grade issuers are large companies in the absolute sense.
1. The strategy aims to outperform the ICE BofA Sterling Corporate & Collateralized Index which is an official benchmark for the fund. Source: Bloomberg, as at 31 August 2021.
| Approach | Long-only |
| Asset Class | Credit |
| Geographic Focus | Global |
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Considerations
Investment Objective Risk - There is no guarantee that the Strategy will achieve its investment objective.
Market Risk - The Strategy is subject to normal market fluctuations and the risks associated with investing in international securities markets and therefore the value of your investment and the income from it may rise as well as fall and you may not get back the amount originally invested.
Counterparty Risk - The Strategy will be exposed to credit risk on counterparties with which it trades in relation to on-exchange traded instruments such as futures and options and where applicable, ‘over-the- counter’("OTC","non-exchange") transactions. OTC instruments may also be less liquid and are not afforded the same protections that may apply to participants trading instruments on an organised exchange.
Currency Risk - The value of investments designated in another currency may rise and fall due to exchange rate fluctuations. Adverse movements in currency exchange rates may result in a decrease in return and a loss of capital. It may not be possible or practicable to successfully hedge against the currency risk exposure in all circumstances.
Liquidity Risk - The Strategy may make investments or hold trading positions in markets that are volatile and which may become illiquid. Timely and cost efficient sale of trading positions can be impaired by decreased trading volume and/or increased price volatility..
Financial Derivatives - The Strategy will invest financial derivative instruments ("FDI") (instruments whose prices are dependent on one or more underlying asset) to achieve its investment objective. The use of FDI involves additional risks such as high sensitivity to price movements of the asset on which it is based. The extensive use of FDI may significantly multiply the gains or losses.
Leverage - The Strategy's use of FDI may result in increased leverage which may lead to significant losses.
Hybrid Securities - The Strategy may invest in contingent convertible (“coco”) bonds. The performance of such bonds is dependent on a number of factors including interest rates, credit and equity performance, and the correlations between factors. As such these securities introduce significant additional risk to an investment in the Strategy.
Single Region/Country Risk - The Strategy is a specialist country-specific Strategy or focuses on a particular geographic region, the investment carries greater risk than a more internationally diversified portfolio.
Total Return - Whilst the Strategy aims to provide capital growth, a positive return is not guaranteed over any time period and capital is in fact at risk.
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