Capital Income Strategy

Seeks to provide downside mitigation and generate a persistent level of stable total returns by investing in a variety of income yielding asset classes.

Strategy at a glance

  1. The above are not investment guidelines or restrictions and are subject to change without notice.

  2. The information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.

Investment Philosophy

Resilience and durability are key features to a “margin of safety” in income investments. Characteristics that we look for may include:
  • Financial flexibility from sound, durable, cash generative business
  • Management’s demonstrated ability and willingness to meet creditor needs
  • Sovereign’s financial strength today and ability to persist into the future in our view Securities are considered because they generate income and are purchased because we believe they offer an appropriate “margin of safety.”

 

Strategy Highlights

  • Seeks to Reduce Overall Portfolio Risk

    Conservative allocation may be ideal for reducing risk in both wealth management and retirement planning, particularly during the transition phase from pre-retirement to retirement.

  • Natural Extension of First Eagle’s Research Platform

    Leverages First Eagle’s global coverage universe, where potential value opportunities across an issuer’s entire capital structure may be sourced.

  • Designed to Help Conserve Capital with Persistent Total Returns

    Conservative value strategy seeking income generating investments with an emphasis on avoiding the permanent impairment of capital.

Strategy at a glance

  1. The above are not investment guidelines or restrictions and are subject to change without notice.

  2. The information provided is not to be construed as a recommendation or an offer to buy or sell or the solicitation of an offer to buy or sell any fund or security.

Stocks ticker

  1. Risk Disclosures

  2. All investments involve the risk of loss of principal.

  3. The value of the strategy’s portfolio may fluctuate in response to the risk that the issuer of a bond or other instrument will not be able to make payments of interest and principal when due. In addition, fluctuations in interest rates can affect the value of debt instruments held by the strategy. An increase in interest rates tends to reduce the market value of debt instruments, while a decline in interest rates tends to increase their values. Longer duration instruments tend to be more sensitive to interest rate changes than those with shorter durations.

  4. The strategy intends to invest in high yield instruments (commonly known as ‘‘junk bonds’’) which may be subject to greater levels of interest rate, credit (including issuer default) and liquidity risk than investment grade instruments and may experience extreme price fluctuations. The securities of such companies may be considered speculative and the ability of such companies to pay their debts on schedule may be uncertain.

  5. The strategy may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Such investments involve a substantial degree of risk. In any reorganization or liquidation proceeding relating to a company in which the strategy invests, the strategy may lose its entire investment, may be required to accept cash or securities with a value less than the strategy’s original investment, and/or may be required to accept payment over an extended period of time.

  6. If a rating agency gives a debt instrument a lower rating, the value of the instrument may decline because investors may demand a higher rate of return.

  7. Disclosures

  8. Note that the Capital Income Strategy has not yet launched and has no historical track record. The Strategy intends to leverage the Global Value Team’s existing research platform, which is responsible for several fundamental, bottom-up strategies with long track records

  9. These are not investment guidelines or restrictions and will be subject to change. Actual portfolio will differ.

  10. FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy, or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product.

  11. Definitions

  12. 1.

    Investment grade allocation would mainly comprise high grade corporate and sovereign bonds (including USD and local currency securities), ultrashort investment grade notes, and nominal and inflation-linked securities (65% excludes cash).

  13. 2.

    High income securities may include corporate and sovereign high yield bonds, preferred and hybrid securities, and potentially dividend yielding equities (35% excludes cash).

  14. 3.

    Yield and duration are not targeted but are residual of value-driven security selection. Interest rate duration may vary over time, depending on the level of compensation for the assumed risk. Yields could also increase (or decrease) as credit spreads widen (or narrow) and as risk-free assets (Treasuries) increase or decrease, in addition to idiosyncratic security performance. When credit spreads are narrow and risk-free yields are low, the portfolio would likely have a shorter duration and less credit risk.

  15. Within a fixed income context, margin of safety refers to the discount to intrinsic value of a security, as determined by a business or sovereign’s ability to generate cash flow to cover interest payments. Margin of safety involves an issuer’s fundamental quality, financial health and management, as well as its credit rating, leverage metrics or bondholder protections.

Show More Show Less

  • Idanna Appio Headshot

    Idanna Appio

    Portfolio Manager and Senior Research Analyst
    Industry start:  
    1998
    Year joined:  
    2015
  • Brooker Kimball Headshot

    Kimball Brooker Jr.

    Co-Head of Global Value Team and Portfolio Manager
    Industry start:  
    1992
    Year joined:  
    2009
  • Adrian Jones Headshot

    Adrian Jones

    Portfolio Manager, Senior Research Analyst
    Industry start:  
    1988
    Year joined:  
    2018
  • George Ross Headshot

    George Ross

    Portfolio Manager and Senior Research Analyst
    Industry start:  
    2002
    Year joined:  
    2003

  1. Note that the Capital Income Strategy has not yet launched and has no historical track record. The Strategy intends to leverage the Global Value Team’s existing research platform, which is responsible for several fundamental, bottom-up strategies with long track records

Our Process

The team seeks to provide downside mitigation and generate a persistent level of stable total returns by investing in a variety of income yielding asset classes. In the team’s view, current income generation and long-term growth of capital are best pursued by first attempting to avoid the permanent impairment of capital. While securities are considered because they generate income, they are purchased because the team believes they offer an appropriate “margin of safety.”

The team uses a value approach, consisting of a bottom-up fundamental analysis, applied to identify income-producing equities and debt securities offering what the team believes to be an attractive expected return relative to their risk level. Investments will be made without any restrictions in terms of geographic allocation, market capitalization, sector, rating, or time to maturity.

 

  • 01

    Seek broad array of possible income-producing opportunities across the capital structure

    • Is there a “margin of safety?”
    • What is the income potential?

  • 02

    Analyze securities for “margin of safety”* and income sustainability

    • Industry analysis
    • Company analysis
    • Security selection
    • Identification of what we seek to avoid
       

  • 03

    Bottom-up portfolio construction

    • Equity: Generate income and seek long-term growth of capital
    • Credit: Generate income
    • Cash and sovereign debt: Deferred purchasing power
    • Gold: Potential hedge
       

  • 04

    Monitor investments to manage downside risk

    • Continuous engagement with companies
    • Continuous investment research

  1. These are not investment guidelines or restrictions and will be subject to change. Actual portfolio will differ.

  1. Risk Disclosures

  2. All investments involve the risk of loss of principal.

  3. The value of the strategy’s portfolio may fluctuate in response to the risk that the issuer of a bond or other instrument will not be able to make payments of interest and principal when due. In addition, fluctuations in interest rates can affect the value of debt instruments held by the strategy. An increase in interest rates tends to reduce the market value of debt instruments, while a decline in interest rates tends to increase their values. Longer duration instruments tend to be more sensitive to interest rate changes than those with shorter durations.

  4. The strategy intends to invest in high yield instruments (commonly known as ‘‘junk bonds’’) which may be subject to greater levels of interest rate, credit (including issuer default) and liquidity risk than investment grade instruments and may experience extreme price fluctuations. The securities of such companies may be considered speculative and the ability of such companies to pay their debts on schedule may be uncertain.

  5. The strategy may invest in securities of companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Such investments involve a substantial degree of risk. In any reorganization or liquidation proceeding relating to a company in which the strategy invests, the strategy may lose its entire investment, may be required to accept cash or securities with a value less than the strategy’s original investment, and/or may be required to accept payment over an extended period of time.

  6. If a rating agency gives a debt instrument a lower rating, the value of the instrument may decline because investors may demand a higher rate of return.

  7. Disclosures

  8. Note that the Capital Income Strategy has not yet launched and has no historical track record. The Strategy intends to leverage the Global Value Team’s existing research platform, which is responsible for several fundamental, bottom-up strategies with long track records

  9. These are not investment guidelines or restrictions and will be subject to change. Actual portfolio will differ.

  10. FEF Distributors, LLC (“FEFD”) (SIPC), a limited purpose broker-dealer, distributes certain First Eagle products. FEFD does not provide services to any investor, but rather provides services to its First Eagle affiliates. As such, when FEFD presents a fund, strategy, or other product to a prospective investor, FEFD and its representatives do not determine whether an investment in the fund, strategy or other product is in the best interests of, or is otherwise beneficial or suitable for, the investor. No statement by FEFD should be construed as a recommendation. Investors should exercise their own judgment and/or consult with a financial professional to determine whether it is advisable for the investor to invest in any First Eagle fund, strategy, or product.

  11. Definitions

  12. Within a fixed income context, margin of safety refers to the discount to intrinsic value of a security, as determined by a business or sovereign’s ability to generate cash flow to cover interest payments. Margin of safety involves an issuer’s fundamental quality, financial health and management, as well as its credit rating, leverage metrics or bondholder protections.

Show More Show Less

Subscribe

Receive updates and articles of interest to you

Subscribe

Contact Us