Jeffrey A. Bakalar
Group Head and Chief Investment Officer, Senior Loans
Group Head and Managing Director, Senior Loans
SummaryActively managed, ultra-short duration floating-rate income strategy that invests primarily in privately syndicated, below investment grade senior secured corporate loans
PhilosophyWe believe that credit selection implemented by experienced credit analysts and consistent application of our investment process within a disciplined research and risk management framework is critical to producing superior long-term, risk-adjusted performance.
ObjectiveTo seek superior long-term risk-adjusted total returns over a full credit and interest rate cycle by investing primarily in a broadly diversified portfolio of senior secured floating rate loans
ProcessOur investment process focuses on fundamental credit analysis, relative value assessment and high levels of diversification. We invest primarily in non-investment grade senior loans because they generally offer attractive yields, are typically secured by borrower assets, and are not subject to traditional interest rate risk. We target non-investment grade senior loans with the objective of achieving superior long-term risk adjusted returns, rather than investing for the absolute highest returns at the expense of significantly increased credit risk. Our investment process utilizes top-down analysis to target industries with strong operating momentum or improving credit conditions, while avoiding those sectors prone to the clustering of defaults. The other major component of our process, specific borrower selection, is based on fundamental bottom-up credit analysis that includes independent credit research, in depth collateral review and relative value analysis.
- Ultra-short duration, secured corporate credit
- Attractive current yield and capital gain opportunity
- High transparency to underlying assets
- Appropriate liquidity options
- Large, experienced, cycle proven investment team
- Disciplined, consistent investment process
Principal RisksRisk is inherent in all investing. The following are the principal risks associated with investing in senior loans. Credit risk: Senior loans are below-investment-grade instruments that carry a higher than normal risk that borrowers may not make timely payments of principal and interest. Failure by borrowers to make such payments may cause the yield and/or the value of your investment to decline. Interest rate risk: The yield on senior loans is directly affected by changes in market interest rates. If such rates fall, the yield may fall. Also, if overall interest rates on loans decline, the yield may fall and the value of the assets may decrease. When market interest rates rise, there may be a delay in the rise in the yield due to a lag between changes in such rates and the resetting of the floating rates on the loans. Limited secondary market for loans: Loans do not trade on an established exchange. There is a limited secondary market for loans. Demand for loans: An increase in demand for loans may adversely affect the rate of interest payable on new loans, and it may also increase the price of loans in the secondary market. A decrease in the demand for loans may adversely affect the price of loans, which could cause the value of loans to decline. Use of leverage: The strategy may engage in leverage for some portfolios. The use of leverage in a portfolio may have a magnifying effect on the returns for a portfolio, both positively and negatively. Foreign currency: The strategy may invest in loans denominated in currencies other than the U.S. dollar. While the strategy seeks to hedge foreign currency risk to the greatest extent practicable, such hedging may not be effective.
*There is no guarantee that this objective will be achieved.