Investment processM&G has historically bought the majority of its Leveraged Loan assets in the primary market which means that there is usually considerable time (two to three weeks) to consider each opportunity as well as having access to company management and full due diligence information including accountants reports, market reports, insurance reports and, where relevant, environmental reports.
In more recent months, there have been greater opportunities to buy discounted loans in the secondary market – either adding to existing positions or buying in the secondary market for the first time. In these latter instances, we would sign a confidentiality agreement to gain access to the full suite of non-public information on the credit in question, such that the full pre-purchase analytical process can be undertaken, as if we were buying in primary.
The process involves the following key steps:
Our fund managers have responsibility for the construction of client portfolios and the day-to-day investment management of these portfolios in order to ensure that they remain compliant with any investment restrictions. They are market facing and therefore, are able to judge the absolute and relative valuations of leveraged loans, both in primary syndication and secondary market.
They provide input to the investment committee process to ensure macro economic and top-down sector views from outside the leveraged finance team are fully reflected in the formulation of any credit rating. Given the risk and return asymmetry historically exhibited by leveraged loans, diversification is key at stock selection leven. Nevertheless, we look to put most risk in areas where we have most conviction taking into account macro, sectoral and valuation biases.
Visit our pooled funds website to find out more about our range of fixed income pooled funds.