Research-driven strategy taps into ‘Credit’s sweet spot’ to offer ‘through the cycle’ risk-adjusted returns for investors

Lombard Odier Investment Managers (“LOIM”) has expanded its fixed income franchise with the launch of Fallen Angels Recovery, a high conviction strategy that invests in companies that have fallen down the ratings spectrum, and yet display strong recovery prospects and an attractive valuation proposition.

The Fallen Angels Recovery strategy launched on 30 November 2021 and has assets under management of USD 86m (as at 31 December 2021).

Fallen angels are bond issuances that have been downgraded from Investment Grade to High Yield, but which are strongly undervalued relative to their rating peers. Using a high conviction and research-driven approach, the Fallen Angels Recovery strategy offers attractive ‘through the cycle’ risk-adjusted returns for investors and provides strong market exposure to a recovery, whilst limiting exposure to a sell-off.

The strategy builds upon LOIM’s market leading research into the fallen angel phenomenon, which has shown persistently superior returns over the last sixteen years. In fact, fallen angels have delivered the highest returns of all rating categories both from a total return and credit excess return perspective over that period.

The strategy’s investment approach combines alpha and beta management to mitigate risks and drawdowns, whilst exploiting bottom-up opportunities. Approximately 100 holdings, of which around 90% are BB rated, are selected based on fundamental analysis of the issuer, with sustainability embedded throughout the investment process.

Fallen Angels Recovery is overseen by Yannik Zufferey, CIO for Fixed Income and managed by Ashton Parker, Lead Portfolio Manager and Head of Credit Research. Yannik and Ashton are supported by a dedicated investment team comprised of Jerome Collet, Anando Maitra and Denise Yung.

Yannik Zufferey, CIO, Fixed Income at LOIM commented: “At LOIM we have a long-standing track record in delivering robust returns from crossover credit strategies, and we believe our Fallen Angels Recovery strategy represents a similarly compelling investment opportunity. An initial look at the historical performance of fallen angels versus other corporate credit segments is extremely promising, and our research shows persistently superior risk-adjusted returns for fallen angels over the last sixteen years.

“Our market leading investment team, which combines fundamental credit analysis, systematic capabilities and crossover experience, is committed to capture these opportunities and generate attractive returns for our clients.”

At Lombard Odier Investment Managers, we are rethinkers with one goal in mind. To provide our clients with outstanding investment solutions that meet their needs for the long term and evolve to thrive in the challenging world in which we all live. 

We are focused investment specialists, seeking out investment opportunities that lie on less trodden paths, where our diverse and talented team can add genuine, persistent, value to our clients. We constantly rethink what we know and do, innovating to create new strategies and develop new ways of investing. 

We believe that the next economic revolution has already begun and that sustainability will be a major driver of returns for the foreseeable future and beyond. For those with the skills to adapt to this new reality, sustainability will create new sources of alpha, open up new investment opportunities and lead to enhanced return and reduced portfolio risk.

Our team of sustainability experts combine sophisticated data sources, academic rigour and technical innovation to create leading-edge, science-based tools that provide unique insights that are available to all our investment professionals. 

These unique insights are reflected directly in our growing range of dedicated sustainable investment strategies that are aligned to this core belief - That our economic model must move from being Wasteful, Idle, Lopsided and Dirty to become Circular, Lean, Inclusive and Clean. We call this The CLIC™ Economy.

With more than 160 investment professionals, we are a global business with a network of 13 offices across Europe, Asia and North America and have assets under management of 70 billion CHF (as at 31 August 2021).

For more information: www.lombardodier.com

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