Leveraged Finance U.S. Broad Market High Yield

Investment Objective

PGIM Fixed Income's Broad Market High Yield Strategy seeks to earn 125 bps of alpha with a tracking error budget of 200 bps versus the Bloomberg Barclays U.S. High Yield Index.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.

1 There is no guarantee that this objective will be met.

2 On average, over a full market cycle defined as three to five years.

Available Vehicles

Separate Account

Collective Trusts

Mutual Fund

UCITS

Investment Philosophy

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 Broad Market High Yield strategy.

Security Selection:

100 bps

 

Industry Allocation:

15 bps

 

Beta and Spread Curve Positioning:

10 bps

 

Duration/Yield Curve Positioning:

0 bps

Investment Process

PGIM Fixed Income employs a disciplined, three-step investment process to manage Broad Market High Yield Portfolios:

  1. Leverage firm resources to define the current global backdrop and risk appetite

  2. Security selection, portfolio construction, risk budgeting

    Macroeconomic & Fundamental Research

    Market strategists provide continual macroeconomic assessment

    Research team evaluates all issuers in the universe. Focus on downside protection:

    • Asset Quality
    • Capital Structure
    • Covenants
    Arrow Right

    Relative Value Analysis

    Portfolio managers evaluate and maximize relative value among approved universe:

    • Choose regions & select countries that reflect macro perspective
    • Choose fundamentally strong credits with best relative value
    Arrow Right

    Portfolio Construction

    Credit Analysts, portfolio managers, and risk managers provide continuous oversite:

    • Actively monitor all credits
    • Closely monitor industry and issuer exposures
  3. A rigorous process is employed to monitor risk at all levels

Senior Portfolio Manager

 

Robert Cignarella

CFA, Head of Leveraged Finance