Leveraged Finance U.S. Higher Quality High Yield

Investment Objective

PGIM Fixed Income's U.S. Higher Quality High Yield Strategy seeks to add +125 bps Over Bloomberg Barclays U.S. High Yield Ba/B 1% Capped Index over a full market cycle by emphasizing research-based security selection, subsector/industry selection and rotation, and trading.1,2 The Strategy focuses primarily on the upper quality tier (BB and B rated credits) of the high yield market, which historically has exhibited the most attractive risk/return characteristics.

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

Available Vehicles

Separate Account

Collective Trusts

Mutual Fund

UCITS

Investment Philosophy

PGIM Fixed Income manages U.S. Higher Quality High Yield portfolios based on the philosophy that bottom-up, research-based subsector and security selection can lead to consistent outperformance versus a broad high yield index with a high information ratio. We seek to construct well diversified portfolios of performing credits that are carefully researched. Intensive fundamental research is conducted by an internal research staff to identify strong and improving credits. The breadth and experience of our research organization permit us to apply intense focus on individual securities identified from a broad pool of investment opportunities. Portfolios are actively managed to capture the best opportunities and minimize credit losses, within an environment of disciplined risk management oversight.

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 U.S. Higher Quality 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