MacKay Shields | High Yield Team

Investors seeking to earn higher income rely on MacKay Shields to manage high yield fixed income strategies that attempt to maximize yield and capital appreciation to better achieve their investment objectives. Our High Yield investment team has earned a reputable position investing in high yield assets since 1991 through a disciplined investment process focused on risk control. We believe our success has been a result of the consistent application of a bottom-up, value oriented investment approach to investing in the U.S. high yield market, as well as the talents of a team of investment professionals who have an average of 22 years of investment experience.

We feel strongly that outperformance will be achieved over a full market cycle by limiting defaults through superior credit selection. Our time-tested, disciplined investment process seeks to reduce default risk through extensive credit research. The investment objective seeks to maximize the default-adjusted yield and spread of a diversified portfolio. Because any individual high yield bond priced near par has more absolute downside risk than upside potential, we attempt to control risk and limit defaults in virtually every phase of our investment process.

Our investment process focuses on credits that generate significant free cash flow through the economic cycle and present strong asset coverage. We seek to identify high yield companies with strategic importance in their industries – those with large market shares, low-cost assets and high barriers to entry. Any credit we invest in must have at least 1.5x asset coverage, which we define as our appraisal of a firm’s value divided by the value of its debt fully drawn. By only purchasing credits with at least 1.5x asset coverage, we believe we are building in an acceptable margin of safety against default. From the universe of credits that present an acceptable margin of safety, we search for companies that have the potential for a near-term catalyst or event that may drive capital appreciation. This may include a company’s willingness and ability to tap into equity markets, an operational or financial restructuring that will meaningfully improve financial results, or substantial near-term free cash flow generation that will be used to retire debt. As important as it is to know when to buy a security, it is also necessary to know when to sell. This is critical in high yield management, because the upside on a bond is limited as the price appreciates and it becomes call constrained. We will sell an investment for one of three reasons: 1) the security has reached a target price or yield that makes its relative value unattractive, 2) the issuer’s fundamentals have deteriorated (e.g. asset coverage has been reduced to an unacceptable level), or 3) to diversify the portfolio if a security or industry exceeds certain weighting limits.

Floating Rate High Yield

Objective

Floating Rate High Yield seeks to provide a high level of current income. The strategy also seeks to minimize interest rate risk through its emphasis on variable rate debt and investments with short and intermediate maturities.

Investment Universe

The strategy is comprised of a diversified portfolio of leveraged loans and high yield bonds. Securities are typically found in the Credit Suisse Leveraged Loan Index.

High Yield

Objective

High Yield seeks to identify securities that will minimize defaults and maximize yield and capital appreciation.

Investment Universe

The High Yield universe generally consists of below investment grade corporate securities identified through a bottom-up investment approach.

Low Volatility High Yield

Objective

Low Volatility High Yield seeks to earn attractive, risk-adjusted income through a combination of safety and yield.

Investment Universe

The Low Volatility High Yield universe consists solely of higher quality, shorter duration high yield corporate bonds identified through a bottom-up investment approach.

Select Credit Opportunities

Objective

Select Credit Opportunities strategy has two primary objectives:

Seeks to earn a yield higher than the broad high yield market.
Seeks to maintain a significantly stronger credit profile than the average CCC bond.

Investment Universe

The Select Credit Opportunities universe generally consists of below investment grade corporate securities identified through a bottom-up investment approach.

Andrew Susser

Executive Managing Director
Head of High Yield

Portfolio Managers/Analysts

7

Research Analysts

3

Teams

High Yield Team

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