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.
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.
Short Duration High Yield Composite (as of 6/30/23)
|QTD||YTD||1 YR||3 YR||5 YR||7 YR||10 YR||INCEP
|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|
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.
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.