Yesterday, my colleague, Phelps Hoyt, gave some insight into how industry conferences play into the work of credit analysts at Principal Global Fixed Income. I want to expand a little on their role in our research process and the objectives I pursue when I’m able to attend an investor conference.
While many conferences are held at interesting or beautiful locations, last week, the desert oasis surrounding my hotel provided little more than a change of setting for my morning run. The busy schedule of each day had me going from breakfast at 7:30 a.m. until wrap-up of the evening reception at 10:00 p.m. I came to the conference with several objectives. First, meet with management teams in order to assess the outlook of their business. Second, build deeper relationships with contacts and management of these companies. Lastly, regain perspective that an ever-volatile market can suppress over time. Here’s how things went… Read more
Last week, I was fortunate enough to attend one of the most-respected high yield and leveraged finance conferences in the world; an event that remains the world’s largest and longest-running leveraged finance conference. Every year, the conference aims is to gather the most important issuers, investors and sponsors to discuss the themes that will shape the business in the year ahead. And while the planners designed an agenda with plenty of informative keynote sessions, I found that the most instructive and valuable sessions were the interactive panel discussions and one-on-one meetings.
As an example, on the evening before the conference officially kicked off, a group of investors had the opportunity to sit down with the finance executives of one of the largest high yield telecom issuers and learn first-hand of their business plans and how those will influence the company’s leverage and free cash flows. It was a great opportunity to get a direct view of all the information analysts and investors have had access to through conference calls and SEC reports, but in a clear and simple manner. Read more
You may have noticed over the past several weeks that in addition to the great economic insights posts here on the Institutional Investor section of The Principal Blog, there have been some guest contributors. Several investment professionals from Principal Global Fixed Income have been writing posts that delve into their areas of expertise. You’ve seen posts on managing volatility and tail risk from Derek White, the head of risk management. You’ve read about bank loan strategies from Mark Cernicky, product specialist. You’ve learned about yields on Japanese government bonds from our global strategist, Seema Shah. And you’ve read about 10 concrete concepts to researching high yield from Phelps Hoyt, our head of high yield research.
I’m delighted to announce that because of the positive response we’ve received on the fixed income blog posts, we’ll be expanding our Institutional Investor section to include regular posts from the fixed income team! Read more
There’s a lot of money flowing into bank loans. As of May 17th, bank loan funds have had 48 consecutive weeks of inflows; year-to-date inflows have totaled a record US$24 billion. Compare that with year-to-date inflows of US$2.6 billion for high yield bonds. In fact, over the past 16 weeks, bank loan funds have averaged over US$800 million per week, and six of those weeks have represented the highest flows ever. A recent Wall Street Journal article covered the topic (paywall). Bank loans are a high yield asset class, which draws a natural comparison to high yield bonds. Consider this – despite the overwhelming positive demand for bank loans, year to date, high yield bonds have outperformed bank loans by over 2% (5.51% for the JP Morgan US High Yield Index vs. 3.26% JP Morgan Leveraged Loan Index). To me, this represents both caution and opportunity. Don’t assume that bank loans, as an asset class will outperform high yield bonds. That said, bank loans can still be a positive contributor if you understand what makes the asset class unique and if you understand what makes one issuer better than another. Read more