Overview

The short duration sustainable high yield strategy invests in short duration, high yield corporate debt. We target issuers with strong fundamental financial metrics that recognize the importance of addressing environmental, social, and governance risks directly related to the longevity as well as sustainability of their business operations.

Account Details

Our separately managed short duration sustainable high yield accounts are invested in a portfolio of corporate debt securities typically with high yield or crossover ratings. We customize each portfolio based on individual needs such as target durations, credit ratings, values-based parameters, or income requirements that may not be met by a mutual fund.

Performance

Short Duration High Yield Composite (as of 6/30/23)

  QTD YTD 1 YR 3 YR 5 YR 7 YR 10 YR INCEP
(5/1/2009)
Short Duration High Yield Composite (gross) -3.16% -2.82% -0.81% 0.29% 0.83% 1.77% 2.56% 3.48%
Short Duration High Yield Composite (net) -3.34 -3.16 -1.52 -0.45 0.09 0.95 1.70 2.62
ICE BofA 0-2 Yr Duration BB-B U.S. High Yield Constrained Index 2.05 4.48 7.76 3.41 3.01 3.34 3.53 5.26
Bloomberg U.S. Aggregate Bond Index -0.84 2.09 -0.94 -3.96 0.77 0.44 1.52 2.56
Swipe Table for Full Data

Philosophy

We believe in taking a duration-managed approach to carefully selecting high yield corporate debt and build a portfolio of companies chosen for their fundamental strength and ability to repay debt. Our strict credit standards mean few bonds make it into our portfolio.

Our aim is to be risk managers first and foremost. In doing so, we evaluate each issuer with respect to many areas of risk including business, financial, and sustainability risks. We target strong businesses and work to understand a company’s defensive characteristics; its capital structure; environmental, social, and governance (ESG) practices; and its ability/incentives to repay debt in the case of economic turbulence. Through a comprehensive assessment of credit quality within the high yield debt universe, we focus on identifying and taking advantage of mispricings in the short duration high yield space that are often overlooked, misunderstood, or mis-rated.

We view sustainability factors as credit factors that contribute to an issuer’s creditworthiness, competitive advantage, and staying power. We believe integrating ESG factors into our credit research further mitigates credit risk, resulting in a profile focused on capital preservation and delivering attractive risk-adjusted total returns over time. As such, we employ a strategy that can serve both traditional and sustainable mandates without a tradeoff between performance or progress.

Investment Team

Venk Reddy

Chief Investment Officer – Sustainable Credit

Venk Reddy

Chief Investment Officer – Sustainable Credit

Venk Reddy joined Osterweis Capital Management in 2022 as part of the Zeo Capital Advisors team transition. Prior to founding Zeo Capital in 2009, Mr. Reddy was a co-founder of Laurel Ridge Asset Management, a multi-strategy hedge fund, where he managed the credit, distressed, and event-driven portfolios. Previously, he structured derivative products and was head of delta-one trading as a portfolio manager within Bank of America’s Equity Financial Products group (EFP). Mr. Reddy also managed investments in event-driven situations, convertible instruments, and options at Pine River Capital Management and HBK Investments, where he started his career.

Mr. Reddy is a principal of the firm and a Portfolio Manager for the sustainable credit strategies.

He currently serves as a Trustee of Lick-Wilmerding High School in San Francisco. He previously served as a Trustee and officer of the Katherine Delmar Burke School in San Francisco.

Mr. Reddy graduated from Harvard University (B.A. in Computer Science with Honors).

Marcus Moore

Portfolio Manager

Marcus Moore

Portfolio Manager

Marcus Moore joined Osterweis Capital Management in 2022 as part of the Zeo Capital Advisors team transition, where he was an Assistant Portfolio Manager focused on credit research, including sustainability analysis. Before joining Zeo in 2019, Mr. Moore worked at Wells Fargo Bank for 14 years as an Analyst within Principal Investing, responsible for the retail, consumer, and gaming sectors across various asset classes including high yield bonds, leveraged loans, and structured products. Prior to working at Wells Fargo, Mr. Moore worked at Edison Mission Energy as an analyst and at Hamilton Resources, Procter & Gamble, and Goldman Sachs.

He is a Portfolio Manager for the sustainable credit strategies.

Mr. Moore graduated from Morgan State University in Baltimore, MD (B.S. in Accounting) and from the University of California, Los Angeles Anderson School with an M.B.A. He also holds the CPA designation.

Account Access

Past performance does not guarantee future results.

Rates of return for periods greater than one year are annualized. Performance returns are presented both before and after the deduction of advisory fees. The information given for this composite is historic and should not be taken as an indication of future performance. Account returns reflect the reinvestment of dividends, income, and other earnings as well as the deduction of brokerage fees and other commissions, if any. Prior to 5/1/2022, returns may reflect the deduction of custodian expenses in certain cases. Effective 5/1/2022, returns do not reflect the deduction of such expenses. Net returns reflect the deduction of actual advisory fees, which may vary between accounts due to portfolio size, client type, or other factors. Net returns also reflect mutual fund fee waivers in certain periods. Monthly composite returns are calculated by weighting account returns by beginning market value.

The ICE BofA 0-2 Yr Duration BB-B U.S. High Yield Constrained Index contains all securities in the ICE BofA U.S. High Yield Index rated BB1 through B3 with a duration-to-worst of less than two years. This index reflects transaction costs. This index is the benchmark for the strategy.

Effective 6/30/22, the ICE indices reflect transactions costs. Any ICE index data referenced herein is the property of ICE Data Indices, LLC, its affiliates (“ICE Data”) and/or its Third Party Suppliers and has been licensed for use by Osterweis Capital Management. ICE Data and its Third Party Suppliers accept no liability in connection with its use. See https://www.osterweis.com/glossary for a full copy of the Disclaimer.

The Bloomberg U.S. Aggregate Bond Index (Agg) is an unmanaged index which is widely regarded as the standard for measuring U.S. investment grade bond market performance. It includes all non-convertible, fixed-rate debt issues rated investment grade or higher. This index does not incur expenses and is not available for investment. Index returns reflect the reinvestment of interest.

Source for any Bloomberg index is Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg owns all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

The fee schedule is as follows: 0.75% per annum (minimum account size $250 million). A discounted rate is available for tax-free institutions, eleemosynary accounts and large institutions.

Clients invested in fixed income separately managed accounts are subject to various risks including potential loss of principal, general market risk, default risk, interest rate risk, inflation risk, liquidity risk and small and medium-sized company risk. Fundamental investing that integrates sustainability factors will entail deviations from the benchmark, potentially without resulting in favorable Environmental,Social, or Governance(ESG) outcomes. For a complete discussion of the risks involved, please see our Form ADV Brochure and refer to Item 8.

The Short Duration High Yield Composite includes all fee-paying separately managed accounts and mutual funds that are predominantly invested in fixed income securities of various maturities and qualities, as well as income-generating equities. Individual account performance will vary from the composite performance due to differences in individual holdings, cash flows, etc.