Due to the asymmetric profit/loss potential of assets with credit risk and the difficulty of offsetting bad investment decisions with good ones (unlike with equities), the top investment priority is the negative selection of fundamentally poor quality debtors.
We analyse and screen the entire corporate bond universe as well as existing portfolios using one of the best credit models, “Credit Edge” from Moody’s Analytics. This quantitative approach systematically covers fundamental analysis (balance sheet, financial risk) as well as equity price movements (business risk) with a Merton-type model.
The model has a strong theoretical background and provides a good basis for credit management of broadly diversified portfolios (global database of about 42,000 listed companies and 74,000 corporate bonds) – even compared to an army of credit analysts without real portfolio responsibility. We have been working with Credit Edge for over 20 years and are among the most experienced users in the market.
We complement the quantitative results of the analysis and screening process with qualitative information about the company so that we can better assess and understand the specific risks of a given company and the investment universe.
Selection of specific bonds to build portfolios in line with the investment strategy, the risk budget and the investment guidelines.
We seek opportunities through active credit allocation, i.e. by selecting and weighting sectors, industries, rating categories and countries.