Credit Opportunities Strategy


Credit Opportunities Strategy

The strategy seeks to generate long-term total return from a combination of capital appreciation and interest by seeking the best opportunities in distressed, stressed, and performing credit.

Investment Process

Step 1 – Security Selection

  • Identify and analyze the most attractive stressed and distressed opportunities in high-yield bonds, bank loans, convertible bonds, and preferreds
  • Employ fundamental research to determine the intrinsic value of the underlying business and identify the fulcrum security
  • Evaluate and select the security with the best risk/reward in the capital structure

Step 2 - Portfolio Construction

  • Build a concentrated portfolio of high-conviction driven credits
  • Holdings in performing bonds and loans, stressed and distressed debt, and re-org equity and special situations

Step 3 - Continuous Risk Management

  • Daily portfolio monitoring of change in company and security outlook, and absolute and relative security valuations
  • Derivatives may be used to hedge sector and issuer exposure

Strategy Risk

Credit & Interest: Debt securities are subject to various risks, the most prominent of which are credit and interest rate risk. The issuer of a debt security may fail to make interest and/or principal payments. Values of debt securities may rise or fall in response to changes in interest rates, and this risk may be enhanced with longer-term maturities.

High Yield-High Risk Fixed Income Securities:There is a greater level of credit risk and price volatility involved with high yield securities than investment grade securities.

Bank Loans: Loans may be unsecured or not fully collateralized, may be subject to restrictions on resale and/or trade infrequently on the secondary
market. Loans can carry significant credit and call risk, can be difficult to value and have longer settlement times than other investments, which can
make loans relatively illiquid at times.

Derivatives: Investments in derivatives such as futures, options, forwards, and swaps may increase volatility or cause a loss greater than the principal investment.

Non-Diversified: The fund is non-diversified and may be more susceptible to factors negatively impacting its holdings to the extent that each security represents a larger portion of the fund's assets.

Equity Securities: The market price of equity securities may be adversely affected by financial market, industry, or issuer-specific events. Focus on a particular style or on small or medium-sized companies may enhance that risk.