1. A fundamentally driven bottom-up investment process

Our investment professionals focus on credit as the primary driver of returns.

• Around 90% of excess returns are expected to be driven through security and industry selection.

Fundamental company research is one of Capital Group’s core strengths.

• This fundamental approach can help uncover value in a relatively inefficient and large market. With a market size at over US$11.7 trillion¹ and growing, fundamental credit research is key to finding attractive opportunities across the corporate bond universe.

We believe a key distinguishing feature of our approach is that our investment analysts are not merely credit research analysts whose sole function is to provide recommendations, or which could also sometimes involve a paper portfolio, but instead they also actively manage money, and act on the courage of their convictions. We believe this helps our investment teams communicate more clearly and means more of our best ideas are represented in the strategy. This also makes them better analysts because:

• They think like investors – our analysts are not just credit research analysts.
• Buying a bond gives the clearest possible signal of an analyst’s conviction.
• Our commitment to analysts managing assets makes the role more attractive, which helps us attract and retain the best talent.

2. A unique approach with multi-level risk-management

The portfolio is built directly by investment analysts based on extensive research.

• The team consists of 15 investors with an average of 13 years of investment experience.²
• Specialists who know their sectors, act as investors. In particular, we believe this set-up enables us to uncover value and alpha sources which might otherwise be missed with an opportunity set as wide, disparate and intricate as that represented by the fixed income investment universe.

The Principal Investment Officer (PIO) co-ordinates the allocation of assets and has overall responsibility for the portfolio.

• This ensures our highest conviction views are reflected in the strategy. The PIO also works alongside our Portfolio Strategy Group and Capital Strategy Research team in order to consider macroeconomic themes.
• The PIO works with the Risk and Quantitative Solutions group to understand and manage sources of risk in the strategy. This helps control risk without stifling investment ideas.

Our independent risk team is a dedicated and highly skilled one that is integrated into Capital Group’s fixed income investment group. The team’s goal is to deliver long-term positive contributions to fixed income investment results and risk awareness by improving quantitative aspects of the investment process. We believe this helps us understand where risk is being taken and manage those risks appropriately.

• The ultimate goal is to contribute to superior long-term results through disciplined risk management.

Integration with our equity research team allows greater access to management teams and allows us to build differentiated insights.

3. A higher quality approach to credit

The strategy does not invest in high yield. This provides a greater degree of safety and stability compared with the global corporate fixed income manager universe. Any holdings downgraded from investment grade to high yield are sold within a 3-month window. Within an asset allocation framework this provides for clearer investment grade corporate bond building blocks.

 

1. Market size is based on amount of outstanding debt. Source: Bloomberg. Data as at 31 October 2021

2. Current portfolio manager team as at 31 October 2021. Years with Capital Group as at 31 December 2020. Source: Capital Group.

 

Risk factors you should consider before investing:

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
• Depending on the strategy, risks may be associated with investing in fixed income, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.