Table of Contents
The Multi-Asset Credit Strategy is an actively managed, diversified strategy that seeks +350 bps of annualized gross excess return over the ICE BofAML 3-Month LIBOR Index over a full market cycle.1,2 The Strategy seeks to capitalize on the Firm’s ‘best ideas in global credit’ by allocating assets across the full spectrum of global fixed income sectors and derivatives with a greater focus on credit opportunities. The Strategy incorporates active sector and security selection across geographies and tactical duration, credit quality, yield curve and currency management.
The Multi-Asset Credit Strategy’s philosophy is that diversified portfolios, built through the integration of macroeconomic research, credit research, quantitative research, and risk management can achieve consistent excess returns for clients with a high information ratio or Sharpe ratio. Risk budgeting is central to our approach. This same research-based and relative-value oriented process is implemented across all multi-sector, or broad market, fixed income strategies managed by PGIM Fixed Income.
The Strategy seeks to extract alpha from multiple sources through active allocation with a bias toward the global ‘spread’ fixed income sectors. Allocations are made within risk thresholds established by a ‘risk budget’ created specifically for each portfolio. The Strategy utilizes both top-down and bottom-up investment approaches:
- Country, sector, and currency allocations are determined using both top-down and bottom-up approaches.
- Subsector and security selections are based on bottom-up, fundamental research and relative value analysis.
- Duration and yield curve decisions are primarily driven by top-down research.
We seek to capture several market inefficiencies when investing across the global fixed income markets. Through our large internal research staff, we seek to anticipate both positive and negative economic and credit-related events before others. Using proprietary modeling, we also seek to capture aberrations in global yield curves. Finally, we seek to capture inefficiencies driven by supply/demand and other technical factors, such as a dislocation in spreads across different countries, sectors, industries, and even different maturity bonds or different parts of the capital structure of the same issuer.
PGIM Fixed Income employs a disciplined, three-step investment process to manage Multi-Asset Credit Fixed Income 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.