Strategies
Fixed Income
Sterling Corporate Bond Strategy
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Sterling Corporate Bond Strategy
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Strategies
Fixed Income
Sterling Corporate Bond Strategy
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Sterling Corporate Bond Strategy
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The investment team believes that market participants may often mis-value a company’s default risk, resulting in bond prices that fail to reflect the true credit profile of a company. However, the team believes that the market, over time, will re-value the bond prices of high-quality issuers based on an improving credit profile, thereby offering investors in undervalued, high-quality issuers, the opportunity to potentially exploit these pricing inefficiencies and earn superior returns over the long term.
The team believes that successful credit management depends on four factors:
- A value-driven process
- Forward-looking credit analysis
- Broad diversification to help reduce portfolio risk
- A global approach
Combined quantitative and qualitative investment approach: |
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The team’s investment approach integrates strong qualitative analysis with robust quantitative valuation tools at every stage of the investment process, providing a robust credit management process. |
Extensive experience: |
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The Global Fixed Income Team at Morgan Stanley Investment Management has invested in fixed income assets since 1975, and in European fixed income assets since 1990 |
Global research: |
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The Global Fixed Income Team at Morgan Stanley Investment Management has invested in fixed income assets since 1975, and in European fixed income assets since 1990. |
| 1 | Macro Analysis: |
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The process begins with a top-down value assessment of the corporate bond universe, including a consideration of macroeconomic conditions, the corporate earnings environment and relative valuations. |
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| 2 | Screening: |
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The team applies what they believe to be a unique combination of quantitative and qualitative filters to identify approximately 250 to 300 bond issuers that meet its investment criteria in terms of competitive position, franchise value and management quality. |
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| 3 | Credit Analysis: |
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The team conducts rigorous credit analysis that narrows that universe to approximately 200 investment candidates. |
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| 4 | Valuation Analysis: |
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Using default data and average risk premia, the team derives a fair value spread for each bond, that is compared to the market spread to determine a bond’s under/overvaluation. |
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| 5 | Portfolio Construction: |
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A portfolio of 75 to 100 issuers is constructed, with sector allocation driven primarily from bottom-up security selection (subject to our risk management guidelines). |
