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Seeking Relative Value in High Yield
Prudential High Yield Fund
Interview with: Robert Cignarella, Chris Nicholson

Author: Ticker Magazine
Last Update: Mar 03, 5:19 PM ET
High yield bonds can offer an attractive risk reward profile but the asset class is not without risks and potential volatility. The Prudential High Yield Fund seeks relative value in primarily higher-quality, high-yield bonds that are carefully researched by analysts and portfolio managers.


“Since our strategy is focused on maintaining principal and mitigating downside risk, we invest in, what we consider to be, higher-quality high-yield companies that should survive market cycles.”
A: Investment risk management is embedded across all aspects of the firm’s investment process. Each portfolio’s risk characteristics and positioning versus benchmark are reported and reviewed daily by the Senior Portfolio Managers and a separate Risk Manager. The reports focus on idiosyncratic risk exposures, evaluating active issues on their market-implied credit ratings, and conducting stress tests to gauge the potential effect on a portfolio from various scenarios.

A market-implied rating is based the spread level of a security, not on a credit agency rating. The thresholds for these market-implied ratings are as follows: Maximum issuer threshold of 2.5% overweight a BB name, 1.75% overweight a B name, and 1.25% overweight a CCC name.

Actively managing risk is a key to delivering long-term results—not only the risk of downgrades and defaults, but also industry and issuer exposures, beta positioning to spread, interest rate and yield curve positioning, and liquidity stress exposures.


This information contained herein represents views and opinions as of 14 Feb. 2017. Past performance is not a guarantee or a reliable indicator of future results. There is no guarantee these objectives will be met.

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