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PGIM Fixed Income's European Bank Loan Strategy seeks to provide +150 bps in excess return over the Credit Suisse Western European Leveraged Loan Index (EUR hedged) or a similar market index over a full market cycle. 1,2
The investment philosophy of PGIM Fixed Income’s European Bank Loan strategy is to build balanced and relatively well diversified portfolios of leveraged loans and 1st lien secured bonds in companies with robust operating characteristics and defensible market positions. We believe we can be more selective in choosing our investments due to our broader investable universe and place a greater emphasis on bottom-up analysis, including ESG risk analysis, to identify fundamentally strong credits that offer good relative value for their respective credit quality. Meanwhile liquidity and more granularity in the portfolios we manage allow us to exit investments when we believe the fundamental outlook for an issuer has begun to deteriorate. We believe this philosophy has generally allowed us to manage portfolios to higher ratings and/or higher spreads than our peers, often without sacrificing liquidity.
PGIM Fixed Income employs a disciplined, three-step investment process to manage European Bank Loan Portfolios:
1 There is no guarantee that these objectives will be met.
2 On average, over a full market cycle defined as three to five years.
No risk management technique can guarantee the mitigation of elimination of risk in any market environment.
Source: PGIM Fixed Income as of September 30, 2020.