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PGIM Fixed Income's Credit Opportunities Strategy is a concentrated, high conviction strategy of idiosyncratic global credit opportunities that seeks to maximize total return by investing in high yielding, less liquid global credit opportunities, investing in both performing and special situation investments. The Strategy seeks to outperform 3-Month U.S. T-Bill +10% (net) over the long term. 1
The Strategy's investment approach seeks to identify idiosyncratic global credit opportunities throughout the entire credit cycle, primarily investing across U.S. and European high yield, senior secured loans, and emerging market credit. The Strategy also opportunistically invests global investment grade credit.
The Strategy focuses on mispriced credits and may have significant exposure to distressed securities we believe have the ability to recover and significantly outperform.
Well defined risk parameters help manage downside risk.
Features of the Credit Opportunities Strategy include:
- Approximately 20-30 issues
- 10% maximum per issuer at initial purchase, 35% maximum per corporate industry
- Leverage up to 1/3
- Derivatives permitted
- Seeks to offer greater liquidity than a drawdown structure
PGIM Fixed Income's Credit Opportunities Strategy leverages our well established, proprietary relative value framework as a foundation of its investment process, and includes the following steps:
Source Well Diversified Pool of Opportunities
- Leverage fundamental credit analysis and time-tested, proprietary relative value process within each sector to identify “best ideas” across sectors from universe of approximately 1500 issuers
Refine “Best Ideas” to Identify High Conviction Opportunities
- Reassess “best ideas” based upon multiple factors including return profile, investment horizon and activism thresholds2 to target 20-40 high conviction credits
Optimize Portfolio Construction to Help Minimize Downside Risk
- Capitalize on global credit expertise to assess sector risks and expected returns while utilizing quantitative and risk management analytics to shape the risk profile of the strategy
1 There is no guarantee that these objectives will be met.
2 Activism thresholds are related to special situation credits only.
No risk management technique can guarantee the mitigation of elimination of risk in any market environment.
Source: PGIM Fixed Income as of March 31, 2022.