AXA Investment Managers(AXA IM) announces the launch of AXA IM Maturity 2022, a fixed term bond portfolio primarily invested in US high yield bonds, managed by Pepper Whitbeck, Head of US Fixed Income and Head of US High Yield at AXA IM.
“In this slow growth, low interest rate environment, we believe that active portfolio managers in the US high yield asset class may deliver mid-to-high single digit annualized returns by collecting coupons and avoiding defaults. US high yield offers a diverse, dynamic and liquid investment market. At almost two trillion dollars in size, the US high yield market is significantly larger than the European high yield market, with over 1,000 high yield companies across a wide variety of industries”, said Pepper Whitbeck.
“It is almost impossible to time the market, so this portfolio, which has a predetermined investment period, may help to alleviate investor concerns by mitigating market and interest rate risks. For example, by staying invested for the full five-year investment period, investors can pay less attention to the interim price movements. The portfolio is designed to be held through the predetermined investment period,” he added.
“For investors looking for yield, this has been a challenging environment, however the US high yield market has been delivering so far. We seek to combine finding yield with a prudent approach towards credit selection. We aim to avoid speculative bonds in the portfolio in an attempt to take risks that we can analyze and manage. Our focus is firmly on avoiding defaults.”
The portfolio manager takes a “buy and monitor” approach, intending to hold the securities for five years, the predetermined investment period. The team will build a diversified portfolio of US high yield bonds at the beginning of the term, investing in names that in their view have solid business fundamentals. A strict sell discipline is applied to any position if an issuer’s credit fundamentals deteriorate.
This “buy and monitor” approach aims to maximize yield in a cost-effective manner by minimizing turnover and therefore transaction costs. At the end of the predetermined investment period, the portfolio will self-liquidate -- all bonds will either be repaid or sold.
AXA IM is one of the largest managers of US high yield bond portfolios. The team, consisting of 13 US high yield specialists based in Greenwich, CT, currently manages over US$ 27 billion.