Goldman Sachs Global High Yield Portfolio - The Adviser Centre

[Pages:1]Goldman Sachs Global High Yield Portfolio

Opinion

This Established fund benefits from the quality and depth of Goldman Sachs Asset Management's well-resourced Global Fixed Income team.

Although we expect issuer and security selection to be the main driver of performance over a market cycle, we believe the team's macroeconomic analysis will help the fund navigate turning points in high yield bond markets.

The team has garnered significant assets under management both in the fund and the global high yield strategy. As a result, it features on our Established list even though it remains open to new investment.

Characteristics and Utility

The fund offers pure exposure to global high yield bonds and can be held to gain exposure to the asset class.

This is an inherently risky asset class that is vulnerable to periodic, sharp drawdowns. Performance is historically more correlated to equities than many other bond sectors.

We believe the team's investment philosophy, combined with an awareness of the absolute valuation of the market, means the fund's risk and return characteristics are likely to be broadly in keeping with the high yield benchmarks. However, their willingness to invest in higher yielding bonds when they feel they are being suitably compensated for the investment risk means the team is prepared to tolerate short-term volatility when they believe their long-term analysis to be correct.

Risk Commentary

The fund's KIID Synthetic Risk and Reward Indicator (SRRI) is 4. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 4 means the fund's historic volatility is between 5% and 10%. The fund's risk score is in keeping with the sector. We expect the fund's future standard deviation to be approximately in keeping with that of global high yield bond indices. Different share classes could have differing SRRI scores.

Key Fund Facts

Inception Date: Manager(s) Since: Fund Domicile: Base Currency: Fund Benchmark: IA Sector:

27 January 1998 Global High Yield Team (Jan 98) Luxembourg US Dollar* Barclays US High Yield 2% Issuer Cap Global High Yield Bond

*The fund is US dollar based and is available with hedged and unhedged share classes in a variety of currencies. Currency moves versus the US dollar mean that the performance of the hedged share classes can differ materially from the underlying US dollar-based fund.

Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. A link to the asset manager's website can be found on the relevant fund page at theadvisercentre.co.uk. An asset manager adviser factsheet is also provided there.

Fund Snapshot

A global high yield bond fund, with a bias to US issuers. The approach is based upon credit research combined with global economic and market analysis to inform the fund's aggregate credit risk. Relative to other high yield bond funds, it features in our 'Global High Yield (US Biased), Total Return Focus' category.

Investment Team

The fund is managed by Robert Magnuson, managing director, High Yield and Bank Loans. He joined the firm in 2006 and was promoted to managing director in 2017. Michael McGuiness is head of High Yield and Bank Loans Research, managing a global team of analysts. They are members of the broader Global Corporate Credit team, which is led by Ben Johnson, head of Global Corporate Credit. Sam Finkelstein and Ashish Shah are co-CIOs of Goldman Sachs Asset Management (GSAM) Fixed Income.

Investment Philosophy

The team believes that they can deliver an attractive risk-adjusted return by minimising default losses through an investment process that focuses on detailed company analysis. It is informed by their macroeconomic analysis to highlight areas of particular risk and / or opportunity.

Investment Process

The approach is based upon detailed bottom-up security analysis, combined with a broader assessment of macroeconomic conditions that helps inform company analysis and the geographical, sectoral and rating exposures in the fund. Top-down analysis is undertaken by the Fixed Income Strategy Group and this helps the team to formulate its medium and long-term outlook for the sub-investment grade bond markets. Team discussions also incorporate considerations of investor sentiment, technical factors, valuation and liquidity factors influencing the market. The team undertakes rigorous fundamental company analysis which is focused on defining what the worst case may be for a company in order to minimise the scope for default losses. The internal research process, of which company meetings are an important part, incorporates industry research, an assessment of the business and financial factors affecting a company and stress-testing. The team seeks to identify three to five key factors that could trigger a change in a company's credit profile. The analysts and portfolio managers subsequently place this work in a relative value context, identifying issuers and securities that they believe offer the most value. The team is also conscious of the absolute valuation of the asset class and, in conjunction with their economic outlook, will adapt the aggregate credit risk in the fund according to their valuation assessment.

Portfolio Construction and Risk Controls

The portfolio invests globally although the primary exposure is to North American high yield bond markets and will typically hold around 400 issuers, diversified across sectors. For holders of the sterling share class all nonsterling currency is hedged back to sterling with the team typically using derivatives such as foreign exchange forward contracts.

theadvisercentre.co.uk

This document is for financial professional use only. The Adviser Centre is a trading name of Embark Investments Limited and is not authorised to carry out regulated activities. Embark Investments Limited is a company incorporated in England Company Number 03383730 and is regulated by the FCA, registration number 628981. The information in this document, including information from asset managers and third-party sources, is deemed to be correct at the time of publication but The Adviser Centre takes no responsibility for its accuracy. This document has been written for illustrative purposes and as such is neither a solicitation nor a recommendation with respect to the purchase or sale of any securities. Opinions are always stated honestly and with careful consideration, but they can change at any time. Full fund documentation provided by the asset manager should be reviewed as part of any decision-making process. Any investment's value and any income from it may fall as well as rise because of market and currency fluctuations. Investors may not get back the amount originally invested. V.2 23/4

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