High Yield Strategy


Inception Date: NOV 01, 2004

Seeks to provide investors with a level of current income consistently in excess of U.S. Treasuries.

Investment Philosophy

We believe the high yield market gradually misprices default risk throughout the credit cycle.
In ebullient markets when credit spreads tighten, we believe default risk is underestimated and as such will move to higher quality, more liquid positions. In periods of market distress, when spreads are compensatory for the level of default risk, we will increase our positions in lower rated credits and add incremental credit risk to the portfolio. The team believes that rotating risk* in each phase of the high yield market cycle is critical to delivering consistent outperformance. 
 

Strategy Highlights

  • Focus on risk

    rotation versus sector rotation

  • Absolute return orientation

     

  • Continuity of core team

    with attractive long-term performance

  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. Prior to 07-Dec-2009, First Eagle Investment Management, LLC was known as Arnhold and S. Bleichroeder Advisers, LLC.

  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. *In this context, risk is defined as the use of high yield securities rated below the highest rated category of non-investment grade. High yield bonds include those that carry a rating such as Ba1/BB+ or lower by credit rating agencies. All high yield securities are considered "speculative" and are often referred to as "junk" bonds.

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  • Edward Meigs

    Co-Head of High Yield Team and Portfolio Manager

    Industry start:  
    1988
    Year joined:  
    2011
  • Sean Slein

    Co-Head of High Yield Team and Portfolio Manager

    Industry start:  
    1988
    Year joined:  
    2011

Process

The team emphasizes a fundamental bottom-up research approach that drives the identification of investment opportunities in all market environments. The three phases of the process are:

  • 01

    Credit Cycle and Strategy Assessment

    The team believes that effective management through the high yield cycle is critical to delivering consistent outperformance. They begin by assessing the primary market and continue with an evaluation of the global economic outlook.

    • Assess the primary market
    • Focus on spreads
    • Evaluate the global economic outlook
  • 02

    Fundamental Research

    The emphasis is on bottom-up fundamental research that drives the identification of investment opportunities in all market environments. Research focuses on answering one core question: Does the enterprise possess the ability and willingness to successfully pay coupons and repay or refinance principal?

    • Deconstruct the financials
    • Understand the business
    • Valuation
  • 03

    Portfolio Construction

    The team approaches risk management at both credit-specific and portfolio levels.

    Credit-level risk management begins at the security level. 

    The team has the flexibility to invest in opportunities that they feel have an attractive “margin of safety” at the time of purchase. They seek to avoid issuances whose dynamics are unfavorable to high yield debt holders.

    Portfolio-level risk management begins by rotating risk 

    The team rotates risk by considering each phase of the high yield market cycle. In each phase, the strategy may move to overweight or underweight higher and lower quality credit tiers in order to add or reduce risk to the portfolio and to rebalance the portfolio's sensitivity to economic growth.

  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. Prior to 07-Dec-2009, First Eagle Investment Management, LLC was known as Arnhold and S. Bleichroeder Advisers, LLC.

  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.

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Annual Returns (%)

  1. Past performance is not indicative of future results

Trailing Returns (%)

Period: 1-Oct-2011 to 30-Jun-20232nd QtrYTD1 Year3 Years5 Years10 YearsSince 1-Oct-2011
High Yield Composite (Gross Return) 1.43 4.94 9.35 4.06 3.37 4.12 5.50
High Yield Composite (Net Return) 1.23 4.52 8.48 3.23 2.52 3.30 4.67
Bloomberg US High Yield – Corporate Index 1.75 5.38 9.06 3.13 3.36 4.43 5.75
Excess Gross Return -0.32 -0.44 0.28 0.93 0.01 -0.30 -0.25
Excess Net Return -0.52 -0.85 -0.59 0.10 -0.83 -1.13 -1.08
  1. Past performance is not indicative of future results

GIPS Report

Year EndTotal Firm Assets (USD Millions)Composite Assets (USD Millions)Number of AccountsComposite GrossComposite NetMSCI EAFE Small Cap (Net)3Y ex-post Std. Dev. Composite3Y ex-post Std. Dev. MSCI EAFE Small CapComposite Dispersion
2022 102,798 178 Five or Fewer -7.88% -8.61% -11.19% 9.26% 10.97% N.A.
2021 110,254 230 Five or Fewer 4.35% 3.73% 5.28% 7.77% 9.00% N.A.
2020 108,794 272 Five or Fewer 8.47% 7.61% 7.11% 7.72% 9.24% N.A.
2019 96,434 296 Five or Fewer 9.91% 9.03% 14.32% 2.80% 4.02% N.A.
2018 91,890 572 Five or Fewer 0.49% -0.31% -2.08% 5.46% 4.59% N.A.
2017 116,057 462 Five or Fewer 5.74% 4.90% 7.50% 6.78% 5.57% N.A.
2016 99,086 590 Five or Fewer 18.19% 17.26% 17.13% 7.05% 6.00% N.A.
2015 92,369 681 Five or Fewer -6.21% -6.86% -4.47% 5.10% 5.26% N.A.
2014 99,470 994 Five or Fewer 0.58% -0.12% 2.45% 3.91% 4.50% N.A.
2013 92,511 1,128 Five or Fewer 7.80% 7.05% 7.44% 5.70% 6.41% N.A.
2012 72,916 756 Five or Fewer 16.17% 15.35% 15.81% 6.54% 7.08% N.A.
             
1 Year Ending 30-Jun-2023 9.35% 8.48% 9.06%
3 Year Ending 30-Jun-2023 4.06% 3.23% 3.13%
5 Year Ending 30-Jun-2023 3.37% 2.52% 3.36%
10 Year Ending 30-Jun-2023 4.12% 3.30% 4.43%
  1. Performance represents a non-annualized partial period return beginning on 1-Oct-2011.

  2. N.A. – Information is not statistically meaningful due to an insufficient number of portfolios in the composite for the entire year. Composite dispersion calculated using gross returns.

  1. High Yield Composite contains fully discretionary high yield accounts invested primarily in the high yield, below investment grade instruments, including corporate debt and loan instruments. For comparison purposes, the composite is measured against the Bloomberg Barclays US Corporate High Yield Index. The asset mix of the accounts in the composite may not be comparable to the Bloomberg Barclays US Corporate High Yield Index. Indices do not incur management fees or other operating expenses. Investments cannot be made directly into an index.

    Prior to 07-Dec-2009, First Eagle Investment Management, LLC was known as Arnhold and S. Bleichroeder Advisers, LLC.

    First Eagle Investment Management, LLC claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. First Eagle Investment Management, LLC has been independently verified for the periods 01-Jan-1996 through 31-Dec-2021.

    A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm's policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. The High Yield Composite has had a performance examination for the periods 01-Oct-2011 through 31-Dec-2021. The verification and performance examination reports are available upon request.

    GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.

    First Eagle Investment Management, LLC is an independent SEC registered investment adviser. THL Credit Advisors was acquired and made a part of First Eagle Alternative Credit since Jan-2020. As of 01-Jan-2020, First Eagle Investment Management was redefined to include the Alternative Credit division. A list of composite descriptions, a list of limited distribution pooled fund descriptions, and a list of broad distribution pooled funds are available upon request.

    Results are based on fully discretionary accounts under management, including those accounts no longer with the firm. Non-fee paying assets as a percentage of the composite’s assets on December 31 were 62.68%, 45.86%, 55.36% and 62.31%, for 2007, 2008, 2009 and 2010, respectively. Past performance is not indicative of future results.

    The U.S. Dollar is the currency used to express performance. Returns are presented gross and net of management fees and include the reinvestment of all income. The net of fees performance is calculated using the highest management fee of 0.80% applied monthly. Prior to Feb-2016 the net of fee performance was calculated using the highest management fee of 0.70% applied monthly. The change in fees used to calculate composite net performance was due to one of our larger funds being assessed a higher fee in February 2016. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. From 01-Nov-2011 to 31-Dec-2013, return figures for client account that is a mutual fund reflect contractual waivers and/or expense limitations, without which net returns would have been lower.

    The annual composite dispersion presented is an equal-weighted standard deviation calculated for the accounts in the composite for the entire year. The 3-year ex-post standard deviation is calculated using gross returns.

    Past performance is not indicative of future results.

    The investment management fee for separately managed accounts is 0.70% on assets. Actual investment advisory fees incurred by clients may vary. The collection of fees produces a compounding effect on the total rate of return net of management fees. As an example, the effect of investment management fees on the total value of a client’s portfolio assuming (a) quarterly fee assessment, (b) $1,000,000 investment, (c) portfolio return of 8% a year, and (d) 1.00% annual investment advisory fee would be $10,416 in the first year, and cumulative effects of $59,816 over five years and $143,430 over ten years. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request.

    The High Yield Composite has an inception date of 01-Oct-2011. Performance for 2004 represents a non-annualized partial period return beginning on 01-Nov-2004. First Eagle Investment Management, LLC acquired the High Yield Team on 30-Sep-2011 from Dwight Asset Management Company.

    Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request.

  2. Risk Disclosures

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

  4. 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.

  5. 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.

  6. 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.

  7. 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.

  8. Disclosures

  9. Prior to 07-Dec-2009, First Eagle Investment Management, LLC was known as Arnhold and S. Bleichroeder Advisers, LLC.

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

  11. 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.

  12. Benchmark Definitions

  13. Indices are unmanaged and do not incur management fees or other operating expenses. One cannot invest directly in an index.

  14. Barclays Capital U.S. Corporate HY Index (Net): The Barclays Capital U.S. Corporate HY Index (Net) is composed of fixed-rate, publicly issued, noninvestment grade debt, is unmanaged, with dividends reinvested, and is not available for purchase. The index includes both corporate and non-corporate sectors. The corporate sectors are Industrial, Utility, and Finance, which include both US and non-US corporations.

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