High Yield Strategies
TCW MetWest’s High Yield Fixed Income strategy seeks to outperform the Barclays Capital U.S. High Yield 2% Issuer Cap Index, while maintaining overall risk similar to the index.
Our investment team constructs portfolios with representation in each of three major credit quality tiers (high, mid and low credit quality tiering) and invests across a wide spectrum of industry sectors. We seek to add value through extensive credit research and a focus on asset value, cash flow and seniority.
Our high yield fixed income investment philosophy is based on the underlying premise that over the course of the credit cycle the high yield value proposition transitions from lower-tier to higher-tier quality. Through an approach that emphasizes idiosyncratic risk, TCW MetWest’s proprietary credit analysis seeks to find pricing inefficiencies throughout the full market cycle.
Thus our portfolio philosophy is built upon the foundation of thorough, fundamental credit analysis. Given the asymmetric risk-return profile of the high yield asset class across various points in a full credit cycle, our fundamental credit analysis emphasizes tangible asset value and discernable, robust free-cash-flow generation – essentially “two ways out” of any investment.
Amongst other metrics, our portfolio managers focus on structural position in the capital structure, inter creditor conflicts, intra-company and off balance sheet liabilities, two-year liquidity estimates, strength of bondholder protections and management acumen. We believe this ‘downside protection’ philosophy allows us to best optimize total return while preserving investors’ capital.