The funds have a wide universe but focus on the subordinated debt mainly of investment grade
companies with a current focus on those issued by financial institutions. The managers also allocate to
corporate bonds of non-financials and corporate hybrid bonds and can invest in some high yield and
emerging markets-based issuers. Consequently, their investment universe is very broad but has no
single, commercial index that accurately describes it.
To give an idea of scale, the subordinated debt portion of the global bond universe is around EUR 1.1
trillion 2 in outstanding debt, comprising circa 870 issuers and around 3,100 issues. The managers filter
this extremely deep and diverse universe. They use their non-benchmarked, conviction-driven approach
to instil the discipline of simplicity in the strategy: they focus only on areas of the market where they see
the most promising opportunities and which they know best, and they avoid companies with complicated
business models, excessive leverage and challenging macroeconomic or sector backdrops.
At present, this has resulted in a strong bias to the structurally improving financial sector. The sector
comprises hundreds of companies: banks (ranging from universal banks, investment banks and private
banks) as well as non-bank financial institutions such as life and non-life insurances, asset managers,
brokers, specialised lenders. In addition to the diversification these provide through their widely divergent
business models and balance sheet characteristics, the sophistication and depth of the sub-ordinated
universe means a rich and continuously refreshed opportunity set for the strategy.