Multi-sector credit spans the universe of fixed income asset classes including governments, fixed- and adjustable-rate mortgages, investment grade corporate bonds, asset- backed securities, high yield bonds, leveraged loans and convertibles, emerging markets sovereign debt denominated in hard and local currency, and emerging markets corporate debt. Given the broad opportunity set, multi-sector credit portfolios can be benchmarked against global or domestic aggregate investment grade indexes, cash benchmarks, or they can be total return focused. Our benchmark aware multi-sector credit strategies are benchmarked against global or domestic aggregate indexes, maintain a small allocation to core U.S. investment grade assets, and make extensive allocations to non-benchmark risk assets, such as emerging markets debt, high yield, and non-U.S. investment grade.
Multi-sector credit strategies represent a shift away from core plus portfolios centered around a base allocation of U.S. investment grade corporate debt and securitized markets, expanding the universe geographically to include non-U.S. and emerging markets, and across ratings to incorporate high yield fixed income and leveraged loans, providing investors the potential for greater diversification, mitigation of downside risk, and higher risk-adjusted yields. While providing the widest possible universe of fixed income opportunities, as well as the ability to effectively manage duration, this approach also allows for rotation between asset classes as views on the relative attractiveness of each asset class change through various economic and business cycles.
Stone Harbor’s demonstrated ability in providing multi-sector credit solutions is rooted in teamwork with a 30-year history, a disciplined asset allocation process driven by economic forecasts and expectations of global growth, inflation, and relative market dislocations, combined with security selection expertise based on deep credit analysis and an understanding of each market’s fundamental and technical factors. Risk is managed during asset allocation and security selection.
Our experienced team has been managing multi-sector credit portfolios since 1993. Likewise, our underlying asset class teams manage track records dating back to the early 1990s (e.g., Emerging Markets Debt: 1990, High Yield: 1992), allowing us to combine an asset allocation process tested through various market cycles with market selection expertise from experienced asset class specialist teams.