Multi-Asset Credit strategies adopt an unconstrained approach in allocating across a diversified global opportunity set of fixed income asset classes, in order to seek a total return investment objective while managing downside risk. Investment exposures typically focus on the higher yielding spectrum of the liquid credit markets; however, the strategies retain the flexibility to allocate to global investment grade markets when a defensive position is deemed appropriate. These strategies provide broad credit market exposure across governments, fixed and adjustable rate mortgages, investment grade corporate bonds, asset-backed securities, high yield bonds, leveraged loans, emerging markets sovereign debt denominated in hard and local currency, and emerging markets corporate debt. Duration is managed within a range of 0 to 5 years. The strategies are not managed against a market benchmark but aim to achieve a total return objective.
Unconstrained multi-sector credit strategies represent a shift away from the investment philosophy of setting fixed allocations, often to multiple managers, in specific compartmentalized asset classes. Instead, this approach allows investors to rotate between asset classes as views on the relative attractiveness of each asset class change through various economic and business cycles. In turn, this rotation provides investors the ability to gain exposure to the widest possible universe of fixed income opportunities, as well as effectively manage duration. Unconstrained total return multi-sector credit portfolios expand the universe geographically to include non-U.S. and emerging markets, and across ratings to incorporate high yield fixed income and leveraged loans, providing a more flexible solution for investors seeking diversification, mitigation of downside risk, and higher risk adjusted yields.
Multi-sector credit strategies offer a flexible and customizable solution to a variety of investor objectives:
- Complete credit solution with broad credit market exposure across geographies, industries, ratings bands, and the capital structure
- Strategies can provide a quicker response to evolving financial market conditions
- Diversified sources of risk and return with varying correlations
- Tactical asset allocation as an additional source of alpha generated through sector rotation.
- Income generation or total return orientation
- De-risking portfolios – allocation of monies from de-risking/reduction of equity exposure
- Return seeking portfolio – complement a liability driven investment strategy
- Duration management – duration preferences can be accommodated
- Stone Harbor’s demonstrated ability in providing multi-sector credit solutions is rooted in teamwork with a 30-year history, a disciplined asset allocation process driven by economic forecasts and expectations of global growth, inflation, and relative market dislocations, combined with security selection expertise based on deep credit analysis and an understanding of each market’s fundamental and technical factors. Risk is managed during asset allocation and security selection. Our experienced team has been managing multi-sector credit portfolios since 1993. Likewise, our underlying asset class teams manage track records dating back to the early 1990’s as well (e.g. Emerging Markets Debt: 1990, High Yield: 1992), allowing us to combine an asset allocation process tested through various market cycles with market selection expertise from experienced asset class specialist teams.
Stone Harbor offers this strategy on a segregated account basis or through commingled funds.
This unconstrained, total return strategy can also be managed in a concentrated, best ideas approach.