Investment Strategies

PGIM Fixed Income’s investment capabilities cover a global range of broad market and sector-specific strategies, as well as alternative and LIBOR-based strategies

Multi-Sector

  • Investment Objective

    The Absolute Return Fixed Income Strategy is an actively managed, diversified strategy that seeks +300 bps of annualized gross excess return over the ICE BofAML 3-month LIBOR Index over a full market cycle.1,2  Unconstrained by a traditional benchmark, the Strategy seeks to capitalize on the Firm’s ‘best ideas’ by allocating assets across the full spectrum of global fixed income securities and currencies, while maintaining a duration profile similar to that of the cash-like benchmark.

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust
    Mutual Fund
    UCITS


    Investment Philosophy

    The Absolute Return Fixed Income 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

     

    Subsector Allocation Subsector and Security Selection Duration/Curve/Currency
    150 bps 75 bps 75 bps


    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.


    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage Absolute Return Fixed Income portfolios:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

  • Investment Objective

    PGIM Fixed Income’s Core Fixed Income Strategy is an actively-managed, multi-sector investment grade fixed income strategy that typically seeks +60 bps annualized over the Bloomberg Barclays U.S. Aggregate Bond Index or similar broad market benchmark over a full market cycle.1,2   

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust
    Mutual Fund


    Investment Philosophy

    PGIM Fixed Income’s Core Fixed Income portfolios are managed based on the philosophy that research-driven security selection is the most consistent strategy for adding value to client portfolios. We complement that base strategy with modest sector rotation, duration management, and disciplined trade execution. Risk budgeting is central to our approach.

    The Strategy tends to generate its excess return over benchmark from fairly equal increments of both sector allocation and subsector/security allocation. Duration and yield curve positioning have historically not been primary sources of excess return but will be considered when exceptional market opportunities dictate. The Strategy is predominately investment grade-focused, but, if individual client guidelines permit, will allocate modestly to non-benchmark high yield bond and emerging markets debt sectors.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    30 bps 25 bps 5 bps

     


    Investment Process

    Core Fixed Income portfolios are constructed using a disciplined three-step process:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

  • Investment Objective

    PGIM Fixed Income’s Core Conservative Strategy is a benchmark-focused, risk-controlled, investment grade Core strategy that seeks +25 bps excess return over the Barclay’s Aggregate Index over a market cycle with index-like risk. 1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust
    Mutual Fund


    Investment Philosophy

    We manage the Core Conservative Strategy as a lower-risk, lower tracking error alternative to other Core Strategies. Our philosophy is to construct highly diversified, benchmark-focused portfolios and implement risk exposures in areas where we have demonstrable expertise, such as research-based subsector and security selection, while constraining top-down exposures such as duration, yield curve, and sector allocation to closely to benchmark. Indeed, our Strategy seeks and generates virtually all of its excess return from just two activities: bottom-up subsector rotation within the corporate and mortgage/structured product sectors, and research-based security selection in all sectors. We believe that intensive, bottom-up fundamental credit research on both industries and securities, coupled with experienced relative value analysis, can effectively identify undervalued yet creditworthy subsectors and securities regardless of environment or market cycle. We regard these as high information ratio, lower risk activities that can consistently generate alpha across markets.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    0-5 bps 20-25 bps 0-3 bps

     


    Investment Process

    The Core Conservative Strategy implement a three-step investment process:
     
    Step 1: Develop benchmark-focused portfolio strategy
     
    Our approach is highly benchmark-oriented. In the US Government sector, our approach is to replicate the index with the most attractively valued securities. In the mortgage sector, we use quantitative models to identify the combination of securities within the Index with the goal of optimizing expected return. In the corporate and structured product sectors, we use fundamental research to identify a small subset of subsectors and individual securities that we believe offer value.
     
    Step 2: Constrain sector, quality, duration, and yield curve deviations to minimize benchmark risk
     
    Our benchmark-focused approach in this Strategy means we seek to minimize tracking error of returns vs. benchmark to an annualized target of +25 bps. To do so, we tightly constrain sector, duration, and quality risk to benchmark, with only moderate yield curve exposure permitted. The goal of this approach is to provide index-like risk while permitting us to add excess return in select areas.
     
    We then look to add alpha through subsector and security selection:

    • US Government and mortgage security selection are based on quantitative research using proprietary models and tools that screen the entire US Government and mortgage markets for attractive trading opportunities. Portfolio managers overlay market technicals and qualitative judgment before establishing trade positions.
    • Corporate bond and structured product security selection is based on extensive fundamental research and relative value analysis.

     
    Step 3: Monitor Portfolio vs. Benchmark on Daily Basis
     
    Each portfolio’s risk characteristics and positioning are monitored daily by both the Senior Portfolio Manager and a separate risk manager via on-line reports. A proprietary system developed by internal Quantitative Research and Risk Management Groups aggregates all risk exposures daily, for each portfolio and its benchmark. Risk exposures approaching predetermined “risk thresholds” are isolated for further discussion with the portfolio manager, and, when appropriate, are raised to the Risk Officer and Chief Investment Officer. In addition, all corporate and structured product credit positions are monitored and managed daily.


    Senior Portfolio Managers

    James Herbst, Managing Director and Senior Portfolio Manager

     Stewart Wong, Principal and Senior Portfolio Manager

     

     

  • Investment Objective

    The Core Plus Fixed Income Strategy seeks to add +150 bps of annualized excess return over a broad market fixed income index over a full market cycle by emphasizing relative-value based sector allocation, research-based subsector/security selection, and duration/yield curve/currency management.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust
    Mutual Fund


    Investment Philosophy

    PGIM Fixed Income’s philosophy is that diversified portfolios, built through the integration of credit research, quantitative research, and risk management, can achieve consistent excess returns for clients with a high information ratio. This same research-based process is similar across all strategies managed by PGIM Fixed Income.

    The Core Plus Fixed Income Strategy seeks excess return from multiple, diversified sources, including sector allocation and subsector and security selection. Duration, yield curve, and currency positioning is moderate. The largest component of the Core Plus Fixed Income risk budget is allocated to investment activities that have consistently generated the highest return for the lowest unit of risk over time, such as sector allocation and subsector/security selection.

    Our Core Plus Fixed Income portfolios may emphasize spread product in the sector allocation process and therefore may hold larger-than-benchmark allocations to corporate bonds, structured product, high yield bonds, and emerging markets debt. As a result, the Strategy would likely outperform in a ‘risk on’ environment where corporate bonds, for example, are outperforming. The reverse would also likely be true.  
    As for security selection, our Core Plus Fixed Income portfolios take an actively-managed, relative-value driven approach. We continually analyze various security relationships in the market in order to exploit temporary market inefficiencies. Each trade is intended to capture small increments of value, with the sum of all relative value security selection expected to contribute a meaningful portion of expected excess return over time. As such, the Strategy is expected to perform best in markets with excess spread dislocations that it can capitalize on through relative value trading. In contrast, a low volatility interest rate environment with little spread or interest rate movements would most likely lead to more stable security-to-security relationships and, in turn, make it more difficult to outperform.

    We believe our philosophy for managing Core Plus Fixed Income portfolios will be successful in the future because it is diversified—relying on several proven strategies rather than a single interest rate, term structure, or credit decision. Two of these strategies—subsector rotation and fundamental security selection—are strategies that we believe are equally appropriate in strong and weak markets, although naturally the subsectors and securities chosen will vary given the economic and market environment.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    75 bps 60 bps 15 bps

     


    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage Core Plus Fixed Income portfolios:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

  • Investment Objective

    The investment objective of the Global Absolute Return strategy is to outperform the 3-Month LIBOR Index (the "Index") by +425 bps over a full market cycle on a total return basis.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Mutual Fund


    Investment Philosophy

    The Global Absolute Return strategy is an actively managed strategy that combines "best ideas" from macro top-down and credit/country bottom-up teams across PGIM Fixed income opportunistically using geography, asset class and sector ideas to find alpha generating trades. Portfolio positioning at any given time is based on where we believe the most attractive risk-adjusted values lie across the investable universe. The strategy is designed to provide flexibility to respond to changing market opportunities to both generate alpha and to mitigate downside risk diversifying across individual issuers, industries and country positions.

     

    Sector Allocation Subsector and Security Selection Duration/Curve Currency
    160 bps 125 bps 70 bps 70 bps

     


    Investment Process

    PGIM Fixed Income employs a disciplined, four-step investment process to manage Global Absolute Return portfolios:


    Senior Portfolio Managers

     Robert Tipp, CFA, Managing Director, Chief Investment Strategist, and Head of Global Bonds

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

  • Investment Objective

    The Global Aggregate Plus Strategy seeks to add +200 bps of annualized gross excess return over the Bloomberg Barclays Global Aggregate Index.  over a full market cycle.1,2 The Strategy invests in debt securities of developed and emerging foreign corporations and governments (including supranational organizations, semi-governmental entities, or government agencies); in investment-grade developed market mortgages and mortgage-related securities; and in developed and emerging short-term and long-term bank debt securities or bank deposits. We look mostly for investment-grade securities denominated in U.S. dollars or foreign currencies but may also invest a portion of assets in non-investment grade, high yield bonds. The Strategy may invest in derivatives to generate alpha and hedge risk exposures.

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Mutual Fund
    UCITS


    Investment Philosophy

    The Global Aggregate Plus Strategy’s philosophy is that diversified portfolios, built through the integration of credit research, quantitative research, and risk management, can achieve consistent excess returns for clients with a high information ratio. This same research-based, relative-value oriented process is implemented across all multi-sector fixed income strategies managed by PGIM Fixed Income.

     The Strategy seeks highly diversified, sustainable sources of excess return across global fixed income sectors and currencies with an emphasis on managing downside risk. The Strategy’s approach focuses on relative-value based country and sector allocation, research-based sub-sector and security selection, and duration, yield curve, and currency management. The Strategy favors the credit-oriented sectors, reflecting the Firm’s significant research expertise.

     

    Sector Allocation Subsector and Security Selection Duration/Curve Currency
    75 bps 50 bps 35 bps 40 bps

     

    We seek to capture several market inefficiencies when investing across the global fixed income markets. We seek to anticipate both positive and negative economic and credit-related events before others do, through our significant internal research staff. To do so, we organize our macro-economic, portfolio management and research teams by region/sector/industry, fostering an in-depth knowledge of trends and individual companies, including ones not always followed closely by Wall Street. We seek to capitalize on currency dislocations and aberrations in yield curves using proprietary modeling. Finally, we look to capture inefficiencies driven by supply/demand and other technical factors, such as dislocations in spreads across different countries, sectors, industries, and even different maturity bonds, or bonds and loans, of the same issuer.


    Investment Process

    PGIM Fixed Income’s process is research-driven and relative-value oriented. All country, sector, and individual bond allocations are made based on internal research. The Team follows a four-step investment process:

     


    Senior Portfolio Managers

     Robert Tipp, CFA, Managing Director, Chief Investment Strategist, and Head of Global Bonds

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

  • Investment Objective

    The investment objective of the Global Core Strategy is to outperform Bloomberg Barclays Global Aggregate Index (the "Index") or similar index by +100 bps over a full market cycle.1,2  The Global Core Fixed Income Strategy seeks alpha from across the global fixed income sectors. The majority of issues are included in its benchmark, the Bloomberg Barclays Global Aggregate Index. The Strategy invests in debt securities of developed and emerging foreign corporations and governments (including supranational organizations, semi-governmental entities, or government agencies); in investment-grade developed market mortgages and mortgage-related securities; and in developed and emerging short-term and long-term bank debt securities or bank deposits. We look mostly for investment-grade securities denominated in U.S. dollars or foreign currencies but may opportunistically invest a portion of assets in non-investment grade, high yield bonds, if permitted by client guidelines. The Strategy may invest in derivatives to generate alpha and hedge risk exposures.

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account


    Investment Philosophy

    The Global Core Fixed Income Strategy’s philosophy is that diversified portfolios, built through the integration of credit research, quantitative research, and risk management, can achieve consistent excess returns for clients with a high information ratio. This same research-based and relative-value oriented process is implemented across all multi-sector fixed income strategies managed by PGIM Fixed Income.

    The Strategy seeks highly diversified, sustainable sources of excess return across global fixed income sectors and currencies with an emphasis on managing downside risk. The Strategy’s approach focuses on relative-value based country and sector allocation, research-based subsector and security selection, and duration, yield curve, and currency management. The Strategy favors the credit-oriented sectors, reflecting the Firm’s significant research expertise.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    45 bps 30 bps 25 bps

     

    The Strategy represents a culmination of our best ideas throughout the firm. We seek to capture several market inefficiencies when investing across the global fixed income markets. We seek to anticipate both positive and negative economic and credit-related events before others do, through our large internal research staff. To do so, we organize our macro-economic, portfolio management and research teams by region/sector/industry, fostering an in-depth knowledge of trends and individual companies, including ones not always followed closely by Wall Street. We also seek to capitalize on currency dislocations and aberrations in yield curves using proprietary modeling. Finally, we seek to capture inefficiencies driven by supply/demand and other technical factors, such as dislocations in spreads across different countries, sectors, industries, and even different maturity bonds, or bonds and loans, of the same issuer.


    Investment Process

    PGIM Fixed Income’s Global Core process is research-driven and relative-value oriented. All country, sector, and individual bond allocations are made based on internal research.  The Global Core Fixed Income Strategy uses four-step disciplined investment approach:


    Senior Portfolio Managers

     Robert Tipp, CFA, Managing Director, Chief Investment Strategist, and Head of Global Bonds

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

  • Investment Objective

    The investment objective of the Intermediate Core Fixed Income Strategy is to outperform Bloomberg Barclays U.S. Intermediate Aggregate Index (the "Index") or similar index by +50 bps.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account


    Investment Philosophy

    PGIM Fixed Income’s Intermediate Core Fixed Income portfolios are managed based on the philosophy that research-driven security selection is the most consistent strategy for adding value to client portfolios. We complement that base strategy with modest sector rotation, duration management, and disciplined trade execution. Risk budgeting is central to our approach.

    The Strategy tends to generate its excess return over benchmark from fairly equal increments of both sector allocation and subsector/security allocation. Duration and yield curve positioning have historically not been primary sources of excess return but will be considered when exceptional market opportunities dictate. The Strategy is predominately investment grade-focused, but, if individual client guidelines permit, will allocate modestly to non-benchmark high yield bond and emerging markets debt sectors.

     

    Sector Allocation

    Subsector and Security Selection Duration/Curve
    10-30 bps 15-40 bps 0-5 bps

     


    Investment Process

    Intermediate Core Fixed Income portfolios are constructed using a disciplined three-step process:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

  • Investment Objective
    The investment objective of the Long Duration Government/Credit Bond strategy is to outperform the Bloomberg Barclays U.S. Long Government/Credit Index (the "Index")  by +60 bps over a full market cycle.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust


    Investment Philosophy

    The Long Duration Government/Credit Bond Strategy seeks to maximize its excess return in equal increments of top-down sector allocation and bottom-up subsector and security selection, with an emphasis on the credit and "spread" sectors.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    20-40 bps 15-40 bps 0-10 bps

     


    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage Long Duration Government/Credit portfolios:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

     

  • Investment Objective

    The Multi-Asset Credit Strategy is an actively managed, diversified strategy that seeks +350 bps of annualized gross excess return over the ML 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.

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years
    .


    Available Vehicles

    Separate Account

    UCITS


    Investment Philosophy

    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.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    215 bps 100 bps 35 bps

     

    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.


    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage multi-sector fixed income portfolios:


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

  • Investment Objective

    The investment objective of the Unconstrained Bond strategy is to outperform the 3-Month U.S. Dollar LIBOR Index (the "Index") by +400 bps over a full market cycle on a total return basis.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account

    Mutual Fund


    Investment Philosophy

    The Unconstrained Bond strategy is an actively managed strategy that seeks to achieve positive returns by investing across a broad range of fixed income sectors, securities and derivatives. The strategy combines "best ideas" from macro top-down and credit bottom-up teams across PGIM Fixed income opportunistically using asset class and sector ideas to find alpha generating trades. Portfolio positioning at any given time is based on where we believe the most attractive risk-adjusted values lie across the investable universe. The strategy is designed to provide flexibility to respond to changing market opportunities to both generate alpha and to mitigate downside risk diversifying across individual issuers, industries and country positions.

     

    Sector Allocation Subsector and Security Selection Duration/Curve/Currency
    200 bps 100 bps 100 bps

     


    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage multi-sector fixed income portfolios:

     

     


    Senior Portfolio Managers

    Michael Collins, CFA, Managing Director and Senior Portfolio Manager

    Gregory Peters, Managing Director and Senior Portfolio Manager

    Richard Piccirillo, Managing Director and Senior Portfolio Manager

     

Investment-Grade Corporates

  • Investment Objectives

    The European Corporate Fixed Income Strategy is a single sector product that invests primarily in investment grade corporate bonds of European country issuers. The Strategy is managed to achieve an excess return of +100 bps* over a iBoxx Euro Corporate Index (USD Hedged), over a full market cycle (three to five years). The table below illustrates the target sources of excess return.1, 2

    1There is no guarantee that these objectives will be met.

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


    Available Vehicles

    Separate Account


    Investment  Philosophy

    PGIM Fixed Income constructs and manages portfolios in the European Corporate Fixed Income Strategy based on the philosophy that bottom-up industry and issue research and security selection, including relative value trading, generate high information ratios and, when executed successfully, can provide sustainable excess return over a European corporate market benchmark.

     

    Security Selection

    Subsector/Industry Allocation Duration/Yield Curve
    60 bps 40 bps 0-5 bps

     


    Investment Process

    The Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Managers

     Steven Kellner, CFA, Managing Director and Head of Credit Portfolio Management

    Edward Farley, Managing Director and Head of the European Corporate Bond Team

     

     

  • Investment Objectives

    PGIM Fixed Income's Global Corporate Fixed Income Strategy is a single sector product that invests primarily in investment grade corporate bonds of U.S., European, and other developed country issuers. The objective of the strategy is to achieve an excess return of +100 bps over a global corporate bond benchmark, typically the Bloomberg Barclays Global Corporate Index (Unhedged), over a full market cycle.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    UCITS


    Investment Philosophy

    PGIM Fixed Income constructs and manages global corporate fixed income portfolios based on the philosophy that bottom-up industry and security selection generate high information ratios and, when executed successfully, can provide sustainable excess return over a global corporate bond benchmark. We follow the same philosophy in all global, U.S., and European corporate fixed income portfolios.

     


    Senior Portfolio Managers

     Steven Kellner, CFA, Managing Director and Head of Credit Portfolio Management

    Edward Farley, Managing Director and Head of Global Corporate Bonds

  • Investment Objective

    PGIM Fixed Income’s U.S. Corporate Fixed Income Strategy is a single sector product, investing primarily in the investment grade corporate fixed income market. The Strategy is managed to achieve an excess return of +60 bps over a corporate market benchmark over a full market cycle with a tracking error budget of 100 bps.1, 2

    1There is no guarantee that these objectives will be met.
    2On 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 constructs and manages portfolios in the Corporate Fixed Income Strategy based on the philosophy that bottom-up industry and issue research and security selection, including relative value trading, generate high information ratios and, when executed successfully, can provide sustainable excess return over a corporate market benchmark.

    Individual security selection and subsector/industry rotation comprise the majority of alpha in the Corporate Fixed Income Strategy.

    Security Selection Subsector/Industry Allocation Duration/Yield Curve
    35 bps 25 bps 0-5 bps

     



    Investment Process

    The Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Manager

     Steven Kellner, CFA, Managing Director and Head of Credit Portfolio Management

Leveraged Finance

  • Investment Objective

    The 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.1

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


    Available Vehicles

    Separate Account


    Investment Philosophy

    PGIM Fixed Income’s European Senior Secured Debt investment philosophy 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 superior 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.


    Investment Process
    The Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Manager

    Jonathan Butler, Head of European Leveraged Finance

     

  • Investment Objective

    Our European High Yield Bonds Strategy seeks to earn 125 basis points (bps) of alpha over ICE BofAML Euro HY ex Finance 2% Constrained Index.1 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.

    1There can be no guarantee that this objective will be achieved.


    Available Vehicles

    Separate Account
    UCITS


    Investment Philosophy

    PGIM Fixed Income believes that actively managed European high yield bond portfolios, constructed from the bottom up using methodical, research-based sector, subsector and security selection, can lead to consistent outperformance versus the broad European high yield index. We focus on security selection which has proven to be a high information ratio activity, and we believe that duration, curve and currency bets in developed market sectors are lower information ratio activities and accordingly we spend no or a low percentage of the risk budget on these latter activities.

     


    Investment Process

    The European High Yield Bonds Strategy is managed utilizing a disciplined three-step investment process:


    Senior Portfolio Managers

     Robert Cignarella, CFA, Head of Leveraged Finance

     Jonathan Butler, Head of European Leveraged Finance

     

  • Investment Objective

    The Global Senior Secured Loans Strategy seeks to provide +100 bps in excess return over a customized blend of the Credit Suisse Leveraged Loan Index and the Credit Suisse Western European Leveraged Loan: Euro Denominated (USD Hedged), or a similar market index.1

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


    Available Vehicles

    Separate Account


    Investment Philosophy

    PGIM Fixed Income manages Senior Secured Loan portfolios with primarily a bottom-up investment approach. The most important determination of our sector/industry exposure, for example, is our bottom-up analysis of credit fundamentals and relative value on an issue-by-issue basis. We conduct in-depth analysis on 20-plus industries in both the U.S. and Europe. Having said that, high-level sector/industry views in our bank loan portfolios are first shaped through the top-down macroeconomic, interest rate, credit, and industry themes expressed in the firm’s Quarterly Market Outlook. The Outlook also includes a credit quality and industry bias for the credit-sensitive sectors of the market, including bank loans.


    Investment Process

    PGIM Fixed Income’s Global Bank Loan Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Managers

     Robert Cignarella, CFA, Head of Leveraged Finance

     Jonathan Butler, Head of European Leveraged Finance

     Brian Juliano, Head of U.S. Bank Loans

  • Investment Objective

    The investment objective of PGIM Fixed Income's Global High Yield Strategy is to outperform the Bloomberg Barclays Global High Yield Index or a similar index by +125 bps.


    Available Vehicles

    Separate Account


    Investment Philosophy

    The Global High Yield Strategy places an emphasis on high yield opportunities around the world, in multiple countries and currencies.


    Investment Process

    The Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Managers

      Robert Cignarella, CFA, Head of U.S. High Yield

     Jonathan Butler, Head of European Leveraged Finance

  • Investment Objective

    The U.S. Senior Secured Loans Strategy seeks to provide +100 bps in excess return over the Credit Suisse Leveraged Loan Index or a similar market index, over a full market cycle.1

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


    Available Vehicles

    Separate Account
    Mutual Fund


    Investment Philosophy

    Our U.S. Senior Secured Loans investment philosophy is to build balanced and well-diversified portfolios of leveraged loans in companies with robust operating characteristics and defensible market positions. We look for management teams with strong track records and experience in managing levered capital structures. Above all, we focus on companies’ ability to generate stable cash flow.

     


    Investment Process

    PGIM Fixed Income’s U.S. Bank Loan Strategy is managed using a disciplined three-step investment process:


    Senior Portfolio Manager

      Brian Juliano, Head of U.S. Bank Loans

  • Investment Objective

    In our Broad Market High Yield Strategy, we seek to earn 125 bps of alpha with a tracking error budget of 200 bps versus the Bloomberg Barclays US High Yield Index.1  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.


    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 Industry Allocation Beta and Spread Curve Positioning Duration/Yield Curve Positioning
    100 bps 15 bps 10 bps 0 bps

     


    Investment Process

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


    Senior Portfolio Manager

     Robert Cignarella, CFA, Head of U.S. High Yield

  • Investment Objective

    The 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 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 this objective will be met.


    Available Vehicles

    Separate Account
    Collective Trusts
    Mutual Fund
    UCITS


    Investment Philosophy

    PGIM Fixed Income manages 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 Industry Allocation Beta and Spread Curve Positioning Duration/Yield Curve Positioning
    100 bps 15 bps 10 bps 0 bps

    Investment Process

    PGIM Fixed Income employs a disciplined, three-step investment process to manage Higher Quality High Yield portfolios:


    Senior Portfolio Manager

     Robert Cignarella, CFA, Head of U.S. High Yield

     

Emerging Markets

  • Investment Objective

    The Emerging Markets Debt Blend Strategy seeks to outperform the blend of the JPM EMBI Global Diversified & GBI-EM Global Diversified indices (the "Index") by +200 bps over a full market cycle by investing in a blend of hard currency sovereigns and quasi-sovereigns, local rates, FX, with opportunistic allocations to hard currency corporates..1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust


    Investment Philosophy

    PGIM Fixed Income’s Emerging Markets Debt investment philosophy is grounded in four beliefs: 

    1) The ever-changing risk appetite of investors is a primary contributor to both market opportunity and market volatility.

    We therefore begin our investment process with a comprehensive assessment of the global appetite for risk.  

    2) Country allocation is a primary determinant of emerging markets portfolio returns.

    We therefore focus a significant part of our investment process on determining our country views. Our country decision process incorporates our global risk view along with an analysis of a country’s foreign exchange, local bonds, and hard currency bonds from a fundamental, relative value, and technical perspective. We heavily emphasize qualitative factors in our fundamental analysis, as they are often the best predictors of performance.

    3) Security selection is also a primary source of alpha generating opportunities

    Our philosophy is to seek the widest possible universe of security selection opportunities, guidelines permitting. We analyze sovereign issuers as well as “quasi-sovereign” issuers within the same country. We evaluate opportunities in both hard currency and local currency bond curves based on potential changes in policy rates and inflation outlook. We evaluate corporate issuers, guidelines permitting.

    4) Dynamic risk budgeting provides a disciplined framework for investment decision-making and provides important risk management as well.

    We heavily rely on risk budgeting and management to provide a consistent and disciplined framework for all investment decisions. We develop a broad strategic risk budget for each client portfolio that reflects the client’s long-term objectives and risk parameters, as well as a tactical risk budget that permits us to incorporate our day-to-day views of market risk tolerances and opportunities within the broader strategic risk budget.

    PGIM Fixed Income’s investment approach seeks to add value primarily through research-based country allocation, security selection, FX, and, to a lesser extent, yield curve management. The Emerging Markets Team’s duration management decisions are made on a country by country basis based on the outlook for central bank policy, inflation, and output gaps.  It is also a function of our assessment of the global appetite for risk, which is Step 1 of our investment process. Yield curve decisions are made with similar considerations.  When we interpret the global appetite for risk as a positive factor (i.e. global investors appear willing to assume more risk), we will tend to express this through slightly more aggressive yield curve positioning.


    Investment Process

    PGIM Fixed Income implements an actively-managed, four-step decision-making process to construct and manage EMD portfolios:

     


    Senior Portfolio Managers

    David Bessey, Managing Director and Co-Head of Emerging Markets Debt Team

    Cathy Hepworth, CFA, Managing Director and Co-Head of Emerging Markets Debt Team

  • Investment Objective

    The Emerging Markets Debt Hard Currency Strategy seeks to outperform the JPM EMBI Global Diversified Index (the "Index") or similar index by +200 bps over a full market cycle by investing in hard currency sovereigns and quasi-sovereigns, with opportunistic allocations to hard currency corporates, local rates, and FX..1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Collective Trust
    Mutual Fund
    UCITS


    Investment Philosophy

    PGIM Fixed Income’s Emerging Markets Debt investment philosophy is grounded in four beliefs: 

    1) The ever-changing risk appetite of investors is a primary contributor to both market opportunity and market volatility.

    We therefore begin our investment process with a comprehensive assessment of the global appetite for risk.  

    2) Country allocation is a primary determinant of emerging markets portfolio returns.

    We therefore focus a significant part of our investment process on determining our country views. Our country decision process incorporates our global risk view along with an analysis of a country’s foreign exchange, local bonds, and hard currency bonds from a fundamental, relative value, and technical perspective. We heavily emphasize qualitative factors in our fundamental analysis, as they are often the best predictors of performance.

    3) Security selection is also a primary source of alpha generating opportunities

    Our philosophy is to seek the widest possible universe of security selection opportunities, guidelines permitting. We analyze sovereign issuers as well as “quasi-sovereign” issuers within the same country. We evaluate opportunities in both hard currency and local currency bond curves based on potential changes in policy rates and inflation outlook. We evaluate corporate issuers, guidelines permitting.

    4) Dynamic risk budgeting provides a disciplined framework for investment decision-making and provides important risk management as well.

    We heavily rely on risk budgeting and management to provide a consistent and disciplined framework for all investment decisions. We develop a broad strategic risk budget for each client portfolio that reflects the client’s long-term objectives and risk parameters, as well as a tactical risk budget that permits us to incorporate our day-to-day views of market risk tolerances and opportunities within the broader strategic risk budget.

    PGIM Fixed Income’s investment approach seeks to add value primarily through research-based country allocation, security selection, FX, and, to a lesser extent, yield curve management. The Emerging Markets Team’s duration management decisions are made on a country by country basis based on the outlook for central bank policy, inflation, and output gaps.  It is also a function of our assessment of the global appetite for risk, which is Step 1 of our investment process. Yield curve decisions are made with similar considerations.  When we interpret the global appetite for risk as a positive factor (i.e. global investors appear willing to assume more risk), we will tend to express this through slightly more aggressive yield curve positioning.


    Investment Process

    PGIM Fixed Income implements an actively-managed, four-step decision-making process to construct and manage EMD portfolios:

     


    Senior Portfolio Managers

     David Bessey, Managing Director and Co-Head of Emerging Markets Debt Team

     Cathy Hepworth, CFA, Managing Director and Co-Head of Emerging Markets Debt Team

  • Investment Objective

    The Emerging Markets Debt Local Strategy seeks to outperform the JPM GBI-EM Global Diversified Index (the "Index") by +150 bps over a full market cycle by investing in local currency sovereigns and FX, with opportunistic allocations to hard currency corporates, sovereigns, and quasi-sovereigns.1,2

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Available Vehicles

    Separate Account
    Mutual Fund
    UCITS


    Investment Philosophy

    PGIM Fixed Income’s Emerging Markets Debt investment philosophy is grounded in four beliefs: 

    1) The ever-changing risk appetite of investors is a primary contributor to both market opportunity and market volatility.

    We therefore begin our investment process with a comprehensive assessment of the global appetite for risk.  

    2) Country allocation is a primary determinant of emerging markets portfolio returns.

    We therefore focus a significant part of our investment process on determining our country views. Our country decision process incorporates our global risk view along with an analysis of a country’s foreign exchange, local bonds, and hard currency bonds from a fundamental, relative value, and technical perspective. We heavily emphasize qualitative factors in our fundamental analysis, as they are often the best predictors of performance.

    3) Security selection is also a primary source of alpha generating opportunities

    Our philosophy is to seek the widest possible universe of security selection opportunities, guidelines permitting. We analyze sovereign issuers as well as “quasi-sovereign” issuers within the same country. We evaluate opportunities in both hard currency and local currency bond curves based on potential changes in policy rates and inflation outlook. We evaluate corporate issuers, guidelines permitting.

    4) Dynamic risk budgeting provides a disciplined framework for investment decision-making and provides important risk management as well.

    We heavily rely on risk budgeting and management to provide a consistent and disciplined framework for all investment decisions. We develop a broad strategic risk budget for each client portfolio that reflects the client’s long-term objectives and risk parameters, as well as a tactical risk budget that permits us to incorporate our day-to-day views of market risk tolerances and opportunities within the broader strategic risk budget.

    PGIM Fixed Income’s investment approach seeks to add value primarily through research-based country allocation, security selection, FX, and, to a lesser extent, yield curve management. The Emerging Markets Team’s duration management decisions are made on a country by country basis based on the outlook for central bank policy, inflation, and output gaps.  It is also a function of our assessment of the global appetite for risk, which is Step 1 of our investment process. Yield curve decisions are made with similar considerations.  When we interpret the global appetite for risk as a positive factor (i.e. global investors appear willing to assume more risk), we will tend to express this through slightly more aggressive yield curve positioning.


    Investment Process

    PGIM Fixed Income implements an actively-managed, four-step decision-making process to construct and manage EMD portfolios:

     


    Senior Portfolio Managers

     David Bessey, Managing Director and Co-Head of Emerging Markets Debt Team

     Cathy Hepworth, CFA, Managing Director and Co-Head of Emerging Markets Debt Team

     

Alternatives

  • Investment Objective
    The Emerging Markets Debt Long/Short Strategy seeks to maximize its total return in excess of 3-month LIBOR (i.e., the alpha) on a risk-adjusted basis over a full market cycle by investing primarily in opportunities in the emerging markets sector of the global capital markets, with a primary emphasis on the fixed income and currency markets.1,2  The Strategy may also invest in derivatives for investment or hedging purposes, which may include credit default swaps, index products, currency forwards, options, and futures contracts.

    1There is no guarantee that these objectives will be met.
    2On average, over a full market cycle defined as three to five years.


    Investment Philosophy

    The Emerging Markets Debt Long/Short investment strategy centers on relative value and directionally driven trades including sovereign and corporate long/short positioning, credit curve positioning, and local currency versus hard currency exposures with dynamic hedging of systemic risk. The intention of the Strategy is to capture alpha without relying on the “beta” return that is reflective of the economic environment.

    In selecting securities, the Strategy seeks alpha through five primary trading strategies:


    Investment Process

    PGIM Fixed Income employs the following five primary strategies in managing the Emerging Markets Long Short Strategy: (i) country-specific trades, (ii) relative value or "pairs trades," (iii) carry trades, (iv) volatility and (v) systematic foreign exchange and rates.

    PGIM Fixed Income also follows a disciplined, four-step approach to manage the Emerging Markets Long Short Strategy:

     


    Senior Portfolio Managers

    David Bessey, Managing Director and Co-Head of Emerging Markets Debt Team

    Cathy Hepworth, CFA, Managing Director and Co-Head of Emerging Markets Debt Team

  • Investment Objective

    PGIM Fixed Income’s Global Liquidity Relative Value Strategy is a market-neutral strategy investing in liquid sectors of developed country fixed income markets and select emerging markets. The Strategy seeks to maximize total return on a risk-adjusted basis, utilizing a 1,000 bps risk budget, by investing in a diversified portfolio of leveraged long/short opportunities implemented using government, sovereign and agency securities and derivatives.

    Using a variety of proprietary relative value models in six different trading strategies, as well as qualitative judgment, the Strategy seeks to constrain systematic risk (i.e. interest rate, curve, currency, spread) to foster more stable returns.


    Investment Philosophy

    The Global Liquidity Relative Value Strategy’s Relative Value platform is predicated on the belief that there are both persistent structural inefficiencies as well as near term dislocations in the liquid and securitized sectors of the global fixed income market. In our experience, different markets are characterized by different structural inefficiencies, some for long periods of time. The proprietary quantitative models we use in the Strategy are expressly designed to identify and capitalize on such inefficiencies. The Senior Portfolio Managers expect that the Strategy will, in the aggregate, exhibit little correlation to the broad equity or fixed income indices.


    Investment Process

    The Strategy utilizes proprietary relative value models in six different trading sub-strategies (described below), and seeks to constrain systematic risk (i.e. interest rate, curve, currency, spread) to foster more stable returns. The Senior Portfolio Manager dynamically allocates to the Sub-Strategies based on his assessment of the opportunities available at any one time.

    With these target weights as a guide, the Senior Portfolio managers continually seek to construct a diversified mix of these strategies to maximize the ex-ante information ratio of an overall portfolio while managing systemic risks. They continually evaluate the opportunity set within each Sub-Strategy and adjust weights accordingly.

    The Senior Portfolio Managers, as well as the sector managers who work with them, seek to identify relative value opportunities using PGIM Fixed Income’s proprietary quantitative analytics, as well as their seasoned qualitative judgment and trading expertise.

    Each opportunity is evaluated by the Senior Portfolio Managers based on its expected unit of return per unit of volatility, net of transactions costs. If the expected return from convergence is greater than the expected volatility, the Portfolio Manager will implement the trade. Specifically, the Portfolio Manager will establish a long position in the “cheap” security and short the “rich” security, while simultaneously taking opposite positions in the financing markets. PGIM Fixed Income incorporates a variety of these types of trades within each Sub-Strategy, seeking at all times to maximize the overall expected information ratio of the overall portfolio while remaining within the constraints established by the risk budget used by PGIM Fixed Income in connection with the management of the Strategy.

    The risk budget is the starting point for portfolio construction. Each sector manager then assesses prevailing relative value opportunities in his sector, mindful of the amount of risk he is able to “spend” in the sector or strategy. Each sector manager then raises his best relative value ideas to the Senior Portfolio Managers, who collectively assess all of the ideas from all sectors together. In making their assessment, the Senior Portfolio Managers consider existing positions in a portfolio, existing risk exposures, the risk budget and how it is currently filled, and market, trading, and liquidity considerations.


    Senior Portfolio Managers

    Craig Dewling, Managing Director and Head of the Multi-Sector and Liquidity Team

     Erik Schiller, CFA, Managing Director and Head of Developed Market Interest Rates

  • Investment Objective

    PGIM Fixed Income’s U.S. Liquidity Relative Value Strategy is a market-neutral, non-credit strategy investing in liquid sectors of the US fixed income market. The Strategy seeks to maximize returns relative to three-month LIBOR by utilizing multiple relative value strategies and investing primarily in long and short positions in U.S. government and agency securities and mortgage-backed securities issued or guaranteed by U.S. government sponsored enterprises or agencies, as well as derivatives on the foregoing.

    Using a variety of proprietary quantitative models as well as qualitative judgment, the Strategy seeks to sell short securities that PGIM Fixed Income considers to be overvalued and take long positions in securities that we believe are undervalued.


    Investment Philosophy

    The U.S. Liquidity Relative Value Strategy’s Relative Value platform is predicated on the belief that there are both persistent structural inefficiencies as well as near term dislocations in the liquid and securitized sectors of the U.S. fixed income market. In our experience, different markets are characterized by different structural inefficiencies, some for long periods of time. The proprietary quantitative models we use in the Strategy are expressly designed to identify and capitalize on such inefficiencies. The Senior Portfolio Managers expect that the Strategy will, in the aggregate, exhibit little correlation to the broad equity or fixed income indices.


    Investment Process

    The U.S. Liquidity Relative Value Strategy currently implements six different trading Sub-Strategies, with three of those Sub-Strategies considered “strategic” allocations and the other three used “opportunistically”. The three “strategic” allocations—the Treasury Optimal, Treasury Relative Value, and MBS Relative Value Sub-Strategies—combined have a current target weight of approximately 70% of a portfolio. The other three—Swap Relative Value, Futures Relative Value, and Spread Trading—are used more opportunistically, and have a current target weight of 30% of a portfolio. Please note that these are “target” weights only and are not hard-and-fast maximums or minimums. Actual portfolio weights may differ materially from target weights in different market environments.

    With these target weights as a guide, the Senior Portfolio managers continually seek to construct a diversified mix of these strategies to maximize the ex-ante information ratio of an overall portfolio while managing systemic risks. They continually evaluate the opportunity set within each Sub-Strategy and adjust weights accordingly.

    The Senior Portfolio Managers, as well as the sector managers who work with them, seek to identify relative value opportunities using PGIM Fixed Income’s proprietary quantitative analytics, as well as their seasoned qualitative judgment and trading expertise.

    Each opportunity is evaluated by the Senior Portfolio Managers based on its expected unit of return per unit of volatility, net of transactions costs. If the expected return from convergence is greater than the expected volatility, the Portfolio Manager will implement the trade. Specifically, the Portfolio Manager will establish a long position in the “cheap” security and short the “rich” security, while simultaneously taking opposite positions in the financing markets. PGIM Fixed Income incorporates a variety of these types of trades within each Sub-Strategy, seeking at all times to maximize the overall expected information ratio of the overall portfolio while remaining within the constraints established by the risk budget used by PGIM Fixed Income in connection with the management of the Strategy.

    The risk budget is the starting point for portfolio construction. Each sector manager then assesses prevailing relative value opportunities in his sector, mindful of the amount of risk he is able to “spend” in the sector or strategy. Each sector manager then raises his best relative value ideas to the Senior Portfolio Managers, who collectively assess all of the ideas from all sectors together. In making their assessment, the Senior Portfolio Managers consider existing positions in a portfolio, existing risk exposures, the risk budget and how it is currently filled, and market, trading, and liquidity considerations.


    Senior Portfolio Managers

    Craig Dewling, Managing Director and Head of the Multi-Sector and Liquidity Team

     Erik Schiller, CFA, Managing Director and Head of Developed Market Interest Rates

  • Investment Objective
    The U.S. Liquidity Relative Value (S&P 500 Overlay) Strategy seeks to achieve a 1.0 beta to the S&P 500 Total Return Index while adding significant alpha over this beta/benchmark exposure.1

    1There is no guarantee that these objectives will be met.


    Investment Philosophy

    PGIM Fixed Income seeks to add 350 bps of alpha over the desired beta exposure with an expected tracking error of 400 bps through a Strategy that capitalizes on relative value opportunities within the most liquid sectors of the U.S. fixed income market, over a full market cycle (three to five years)1. In managing the Strategy, PGIM Fixed Income typically invests 80% of assets in the U.S. Liquidity Relative Value Strategy (20% of assets are held in cash for margin calls), with a 100% beta overlay of S&P 500 futures.  This achieves a beta of 1.0 to the S&P 500 Index.  We expect this approach to achieve significant return enhancement over the S&P 500 Total Return Index, with higher information ratio and excess returns than top ranked active equity managers.

    In times of very low market volatility, the propensity for relative value distortions to arise could tend to be lower, and therefore the resulting alpha could be lower. Conversely, in times of extreme market volatility, particularly when accompanied by overall illiquidity and deleveraging, this Relative Value strategy could underperform cash.

    PGIM expects the Strategy to outperform during periods in which there is reasonable volatility in the markets, and generally decent liquidity to be able to implement relative value positions. A reasonable level of market volatility has tended to result in frequent relative value anomalies and other market inefficiencies on which PGIM Fixed Income’s investment approach seeks to capitalize on. 

    1There is no guarantee that these objectives will be met.


    Investment Process

    The U.S. Liquidity Relative Value (S&P 500 Overlay) Strategy implements six different trading sub-strategies, as shown below. The Senior Portfolio Manager dynamically allocates to the six Sub-Strategies based on their assessment of the opportunities available at any one time:

    1) Treasury Optimal (seeks to maximize fundamental value in US Treasuries, using proprietary quantitative models);
    2) Treasury Relative Value (seeks relative value along the Treasury curve, using proprietary quantitative models along with portfolio manager input);
    3) Mortgage-Backed Securities Relative Value (seeks relative value in mortgages, using proprietary quantitative models along with portfolio manager input);
    4) Swap Relative Value (seeks relative value in the swaps and Eurodollar markets, using proprietary LIBOR curve model);
    5) Futures Relative Value (seeks arbitrage opportunities between futures and Treasury markets); and
    6) Spread Trading (seeks relative value opportunities between LIBOR, Treasuries, Agencies and mortgages).                                                                                         

    In the future, additional relative value strategies may be employed and one or more of these strategies may be discontinued.

    With these allocations as a guide, PGIM Fixed Income’s portfolio managers continually seek to construct a diversified mix of these strategies to maximize the ex-ante information ratio of the overall Strategy. They continually evaluate the opportunity set within each Sub-Strategy, and adjust weights accordingly.                                                                                                                                                                                                                                                                                     
    The S&P 500 overlay is monitored closely on a daily basis and managed to a tight range to fully capture the beta exposure.  The Relative Value portfolio management team adjusts the S&P 500 futures position as necessary to reflect NAV changes due to the alpha generation. The Alternative Products Portfolio Administration team rebalances the portfolio to the 80/20% split on each weekly valuation date by subscribing to or redeeming from the U.S. Liquidity Relative Value Strategy.  As noted earlier, 20% of assets are held for initial margin and potential drawdown for the beta overlay.


    Senior Portfolio Managers

    Craig Dewling, Managing Director and Head of the Multi-Sector and Liquidity Team

     Erik Schiller, CFA, Managing Director and Head of Developed Market Interest Rates

CLO Management

  • PGIM Fixed Income has extensive experience as a global manager for collateralized loan obligations within cash and synthetic structures. Please visit our CLO site for additional information.

     

 


For Professional Investors only. All investments involve risk, including possible loss of capital.

Source(s) of data (unless otherwise noted): PGIM Fixed Income.

It is for informational and educational purposes only and should not be construed as investment advice or an offer or solicitation in respect of any products or services to any persons who are prohibited from receiving such information under the laws applicable to their place of citizenship, domicile or residence. The views and opinions expressed herein are those of PGIM Fixed Income and are subject to change without notice. PGIM, Inc. is the principal asset management business of Prudential Financial, Inc. (PFI) and is a registered investment adviser with the United States Securities and Exchange Commission.  PGIM is a trading name of PGIM, Inc. and its global subsidiaries. In the United Kingdom, and in various European Economic Area (EEA) jurisdictions, information is issued by PGIM Limited, an indirect subsidiary of PGIM, Inc.   PGIM Limited registered office: Grand Buildings, 1-3 Strand, Trafalgar Square, London, WC2N 5HR is authorised and regulated by the Financial Conduct Authority of the United Kingdom (registration number 193418) and duly passported in various jurisdictions in the EEA.  These materials are issued to persons who are professional clients or eligible counterparties for the purposes of the Financial Conduct Authority’s Conduct of Business Sourcebook. In Japan, investment management services are made available by PGIM Japan Co., Ltd. (PGIM Japan), a registered Financial Instruments Business Operator with the Financial Services Agency of Japan.  In Hong Kong, information is presented by representatives of PGIM (Hong Kong) Limited, a regulated entity with the Securities and Futures Commission in Hong Kong to professional investors as defined in Part 1 of Schedule 1 of the Securities and Futures Ordinance.  In Singapore, information is issued by PGIM (Singapore) Pte. Ltd. (PGIM Singapore), a Singapore investment manager that is licensed as a capital markets service license holder by the Monetary Authority of Singapore and an exempt financial adviser. These materials are issued by PGIM Singapore for the general information of “institutional investors” pursuant to Section 304 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA) and “accredited investors” and other relevant persons in accordance with the conditions specified in Sections 305 of the SFA.  In South Korea, information is issued by PGIM, Inc., which is licensed to provide discretionary investment management services directly to South Korean qualified institutional investors.

The information on this website is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. In making the information available on this website, PGIM, Inc. and its affiliates are not acting as your fiduciary under ERISA, any Department of Labor regulations or any other statutes or regulations.

Any discussion of risk management is intended to describe PGIM Fixed Income’s efforts to monitor and manage risk but does not imply low risk.  All investing involves risk, including the risk of loss.  Fixed Income securities are subject to certain risks, including credit, interest rate, issuer, market and inflation risk.  Foreign and emerging market securities are subject to currency, political, economic and market risks, which may be enhanced in emerging market countries.  High Yield securities are lower rated securities that may have a higher degree of credit and liquidity risk.  Mortgage and asset-backed securities are sensitive to early prepayment risk, a higher risk of default and may be hard to value and difficult to sell.  U.S. government securities may not be backed by the full faith and credit of the U.S.; thus, these issuers may not be able to meet their future payment obligations.  With sovereign debt securities, the issuer or governmental authority that controls the repayment of the debt may not be willing or able to repay the principal and/or pay the interest when it becomes due, in accordance with the terms of such obligations.  Collateralized mortgage obligations may have unpredictable cash flows that can increase the risk of loss.  Public bank loans are subject to liquidity risks of lower rated securities.  The use of derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks.

There is no guarantee that any investment strategy will achieve its objective under all market conditions or be suitable for all investors.  Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.  

The views and opinions expressed herein are those of PGIM Fixed Income and are subject to change without notice.

PFI of the United States is not affiliated in any manner with Prudential plc, a company incorporated in the United Kingdom.  PGIM, the PGIM logo and Rock design are service marks of PFI and its related entities, registered in many jurisdictions worldwide.

© 2018 Prudential Financial, Inc. and its related entities.

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