Leveraged Loans

At AUIM, each portfolio is managed under a uniform investment philosophy which is driven by an experienced group of investment and risk management professionals performing in a team oriented environment focusing on fundamentals, technicals and valuation throughout each step of the investment process.

We begin our 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 our clients. AUIM strives to exploit the inherent inefficiencies of the market and outperform the LSTA Leveraged Loan Index weighted 60% BB Index and 40% B Index.

AUIM believes our most valuable attribute to be the results of our rigorous independent bottom-up credit research. Research concentration is given to the quality of the issuer’s collateral as well as the quality of financial covenants and other structural issues. A thorough understanding of the entire competitive landscape helps us to evaluate the strategic positioning of a credit and effectively measure both up and downside scenarios of the process.

AUIM’s history as a manager of insurance assets has ingrained a strong culture of risk management within our 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.

Due to AUIM’s management of two Collateralized Loan Obligations, our portfolio follows stringent mandates which require precise bottom-up credit research. Particular focus is given to senior secured loans where each potential investment is analyzed based on the quality of the issuers’ collateral, quality of the issuers’ financial covenants and other impending structural issues.

Portfolio managers, research analysts and AUIM’s corporate credit research team contribute to idea generation derived from fundamentals, technicals and valuations. Bottom-up credit analysis is applied to all credits using an internal 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.

An overlay of top-down economic, business cycle and sector trend analysis is applied to investment candidates; this step impacts our reluctance to take credit risk in certain industry or rating categories. Before any new name decision is made, the candidate investment must be presented to and approved by the Bank Loan Committee. This presentation by the Leveraged Loans team includes an extensive credit write up for each investment and evaluation of the overall potential of the candidate. Ultimately, the investment is considered within the parameters of the underlying benchmark.

AUIM’s leveraged loan strategy is focused on fundamentals, technicals and valuations at each step of the investment process for owned and considered credits. Our process begins with idea generation and preliminary screening, followed by decision making and evaluation based on credit analysis involving the Bank Loan Committee and finally ongoing management and monitoring. AUIM’s leveraged loan portfolio takes a long term view with emphasis on well structured credits that possess a solid fundamental business model. Thorough analysis covers all aspects of the investment including underlying credit, capital structure, collateral and covenants.

AUIM has managed one Collateralized Loan Obligations since 1999 and another Collateralized Loan Obligation since 2005. Fundamental credit research is at the core of AUIM’s leveraged loan portfolio construction. 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, analysts are able to estimate how well a company’s securities will trade relative to other credits.

This fundamental analysis is then collaboratively reviewed by the Leveraged Loan team and their general view of the economic outlook, market conditions, position in current credit cycle and overall leveraged loan 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.