High Yield Fixed Income

At AUIM, portfolios are managed under a uniform investment philosophy which, is driven by a seasoned group of investment and risk management professionals. Performing in a team oriented environment, AUIM focuses on fundamentals, technicals and valuation throughout each step of the investment process. AUIM begins its investment process with fundamental independent bottom-up research of security and sector, which is communicated amongst AEGON global partners and between different asset classes in order to fully leverage all resources and provide the most optimal service to their clients. AUIM strives to exploit the inherent inefficiencies of the market and out perform the High Yield Index throughout the credit cycle.

AUIM believes its most valuable attribute to be the results of its rigorous independent bottom-up credit research. Concentration is given to specific industries across the credit spectrum, looking for inefficiencies across the cap structure on which we are able to capitalize. A thorough understanding of the entire competitive landscape helps AUIM to evaluate the strategic positioning of a credit and effectively measure the impending upside and limit the downside performance risk. AUIM has also ingrained a strong culture of risk management into its investment framework.

Screening Process

AUIM has ingrained a strong culture of risk management within its investment framework. Adhering to this company culture, we have developed and maintain a very rigorous credit review process designed to identify and assess individual investments both as an independent holding and as a credit that will complement our current portfolio and ultimately add value.

AUIM has an integrated distressed team which has extensive experience in workout and bankruptcy situations. This team is instrumental in screening for “at risk” credits, analyzing downside scenarios, and providing a detailed framework that takes the ambiguity out of difficult “sell” decisions. Through their rigorous research strategy, the distressed analysts are skilled in finding attractive investment candidates that may be overlooked by AUIM’s traditional analysts.

Portfolio managers, research analysts and the distressed team collectively contribute to idea generation derived from fundamentals, technicals and valuation. Credit analysts cover one or more industries, within the full range of corporate credit (from Investment Grade to High Yield). They collaborate with the distressed team, as necessary, to identify several strong credits which have the best risk/reward characteristics. Bottom-up credit analysis is applied to all credits using a proprietary financial model where analysts evaluate financial statements with particular focus on cash flow generation, debt levels and liquidity, monitor current events and project future credit statistics. If a credit is deemed to have material downside scenarios, it is assessed by the Distressed Debt team prior to investment. Extensive valuation and liquidity analysis is performed, projecting downside valuations in various scenarios. If potential exists for meaningful impairment substantially affecting total return, the credit typically is avoided.

An overlay of top-down economic, business cycle and sector trend analysis is applied to investment candidates; this step will impact our reluctance to take credit risk in certain industry or rating categories. Ultimately, the investment is considered within the parameters of the underlying benchmark. However, the benchmark is a baseline and not a blueprint; we are willing and often do take risk away from the benchmark depending on our underlying fundamental view of a credit.

Fundamental credit research is at the core of AUIM’s High Yield portfolio construction. Our analysts’ broad understanding of industry trends and competitive landscape allow for prediction of a company’s prospects over the intermediate term. Coupled with intense focus on cash flow generation, debt levels and liquidity, portfolio managers and analysts are able to estimate how well a company’s securities will trade relative to other credits. This understanding also makes clear the associated downside risk, which is mitigated and/or managed by our Distressed Debt team as necessary.

This fundamental analysis is then collaboratively reviewed by the High Yield team and their general view of the economic outlook, market conditions, position in current credit cycle and overall High Yield trading levels determine the final portfolio construction. The portfolio is actively monitored by both the portfolio manager and analysts who actively communicate and conduct regular meetings, which include AEGON global counterparts.