The strategy invests in a diverse portfolio of opportunities comprising liquid stressed, distressed, and special situation investments in the global leveraged loan and high yield markets.
Our investment universe comprises restructuring, event-driven opportunities, and stressed situations combined with core income. We focus on identifying opportunities with a clear path to exit using bottom-up research and fundamental credit analysis. Our specialists have both the resources and expertise to participate in and, in many cases, lead the restructuring process, which means we can provide our expertise from start to finish in order to drive a consensual restructuring.
Strategy overview
- Targets attractive risk‐adjusted returns from investing primarily in stressed and event-driven opportunities through a combination of both income and capital appreciation
- Capital preservation mindset focused on downside protection as well as total returns
- Forensic approach to proprietary research
- Exacting approach to credit selection and portfolio construction
- ESG analysis integrated into credit assessment process
- Longstanding team of highly experienced research analysts and portfolio managers
- Repeatable process helps maximize the probability of successful outcomes
Our approach
Investment philosophy & style
The strategy is focused on investing in what the team considers to be fundamentally mis-valued credit securities, allocating freely between bonds and loans and with a focus on developed markets.
Investments are typically held for 6 to 18 months, and the managers select single-name corporate issuers where an identified event is likely to provide a clear path to exit. The investment process is predicated on maximizing risk-adjusted returns and utilizes the skills of the wider BlueBay leveraged finance analysts, ensuring breadth and depth of issuer coverage.
Investment process
- Top-down macro inputs help inform thematic credit strategies.
- Active allocation within individual capital structures based on the asymmetric risks identified within each opportunity via:
- in-depth proprietary analysis and modelling with a focus on downside stress test;
- particular focus on covenant analysis and management engagement; and
- restructuring analysis encompassing specialist internal and external resource.
- Deep, fundamental research-oriented approach undertaken by the wider BlueBay leveraged finance specialists focuses on rigorous bottom-up security selection.
- The consideration of environmental, social, and governance (ESG) factors is an important aspect of the investment process and is integrated in all investment decisions.
Portfolio construction
The strategy is allocated across four principal categories:
- Event Driven/Stressed: Identifying credits where there is a near- to medium-term event such as asset sale/refinancing/M&A, or where an operational or financial turnaround is anticipated.
- Restructuring: Active participation in selective restructuring situations.
- Core Income: Conviction views in higher yielding credit.
- Credit shorts: Short position in corporates with sector stress/deteriorating cash flow profiles.
- Typically hold 30–50 core positions.
- Holdings diversified by industry, sector, and geography, with limits on security concentration.
- Disciplined focus on downside risk management.