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PGIM Fixed Income's U.S. Broad Market High Yield Strategy seeks to earn 200 bps of alpha over the Bloomberg Barclays U.S. High Yield Index over a full market cycle.1,2 We expect tracking error based on historical volatility measured over a long term period to occur from holding position sizes in portfolios that differ from the issuer’s weighting in the benchmark and from holding positions in issuers that are not in the benchmark.
PGIM Fixed Income believes that actively managed high yield bond portfolios, constructed from the bottom up using methodical, research-based subsector and security selection, can lead to consistent outperformance versus the broad high yield index with a high information ratio. The table below illustrates our expected sources of excess return for the U.S. Broad Market High Yield strategy.
PGIM Fixed Income employs a disciplined, three-step investment process to manage U.S. Broad Market High Yield 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.