Our Approach
Fixed Income

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Idea Generation


  • We screen the universe of public companies looking for those that meet our various credit and ratio requirements.
  • We continuously review our internal credit database of companies we have analyzed and, in many cases, whose debt we have owned throughout the years.
  • We collaborate with our equity research team for their knowledge, insight, and expertise regarding industries, companies, and general financial information.
  • We examine dealer inventory, monitor select offerings, as well as review individual company and sector news.
  • We analyze economic data and other news items that can provide the basis for investment themes.

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Initial Credit Analysis


  • We review the quality of the business. We look for leaders in an industry or sector that are likely to recover or flourish.
  • We analyze the strength of the company's financial statements and business model, as well as prepare a summary financial model.
  • As part of our margin of safety consideration, we examine a bond's discount to its implied credit rating and its historical spread.

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Detailed Analysis


  • We build a 10- to 20-year in-depth historical financial model. This allows us to take a deep look into identifying the key value drivers, turning points, and high and low spreads.
  • We project the future financials of the company under various scenarios, adjusting for growth rates, margins, multiples, and other aspects of the company's financial statements that may affect its current and future value.
  • We generate an internal credit rating, as well as analyze a range of possible outcomes relative to existing and implied future credit ratings.
  • We determine actionable price points. We typically think of these price points in terms of ranges and zones in which the company's debt can trade given certain circumstances.

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Review and Approval Process


  • Analysts present their new investment opportunities to portfolio managers. This gives the portfolio managers the opportunity to challenge, test, and discuss the analyst's research and major assumptions.
  • Portfolio managers focus their attention on attractively priced securities with projected stable or improving credit profiles and favorable reward-to-risk characteristics.
  • Portfolio managers determine if the analyst's price points incorporate a proper margin of safety and if the company is suitable for investment in one or more of the CM investment strategies.
  • Portfolio managers make the final determination as to whether or not the reward-to-risk characteristics of the company warrant putting it on the CM approved list of investment opportunities.
  • If approved, final actionable price points and maximum position size are agreed upon by the portfolio managers.

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Portfolio Construction


  • The direction of inflation, interest rates, and risk premiums will help drive our asset allocation.
  • Specific portfolio construction characteristics will vary depending on the client's chosen investment strategy. Details, such as specific trading instructions, maximum position size, average number of holdings, as well as minimum and maximum cash levels allowed in a portfolio, may vary.
  • Using our disciplined buy and sell criteria, portfolio managers, along with the CM trading team, execute trades and facilitate the portfolio construction.
  • The monitoring and review of individual holdings, their spread-to-risk characteristics, and investment strategies are performed by portfolio managers and other members of the investment team on an ongoing basis.

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