News & Insights

Q3 2022 High Yield Market Update

Portfolio Manager Mark Hudoff reviews:

  • Performance drivers for the third quarter of 2022
  • Credit market dynamics, including liquidity and spreads
  • Portfolio positioning and our current assessment of high yield fundamentals, technicals, and valuation

 

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All investments contain risk and may lose value. This podcast is for general information only and should not be relied on for investment advice or recommendation of any particular security, strategy, or investment product.

The portfolio manager’s views and opinions expressed in this podcast are as of October 17, 2022. Such views are subject to change without notice and may differ from others in the firm, or the firm as a whole. The portfolio manager’s comments may include estimated and/or forecasted views, which are believed to be based on reasonable assumptions within the bounds of current and historical information. However, there is no guarantee that any estimates, forecasts or views will be realized. The podcast may also contain views that are forward-looking statements. Due to various risks and uncertainties, actual events/results or the performance of the High Yield strategy may differ materially from those reflected or contemplated in such forward-looking statements.

Investment returns include reinvestment of dividends, interest and capital gains. Valuation is based on trade-date information. Net performance results are presented after actual management fees and all trading expenses but before custodial fees. The High Yield strategy’s returns for different time periods and market cycles can result in significantly different performance results. An account’s investment guidelines, timing of transactions, market conditions at the time of investment and other factors may lead to different performance results. The Composite includes all High Yield discretionary accounts. The High Yield strategy seeks high current income combined with the opportunity for capital appreciation to maximize total return primarily through investments in high yield securities and rated below investment grade fixed income instruments.  It may also use futures, swaps and other derivatives, mortgage- or asset-backed securities and restricted securities that are sold in private placement transactions. Additional performance disclosures are included in the strategy’s GIPS Report.

Any discussion or view of a security, an asset class/segment, industry/sector and/or investment type are not investment recommendations, should not be assumed to be profitable, and are subject to change without notice. In the event of new information or changed circumstances, H&W reserves the right to change its investment perspective and outlook and has no obligation to provide revised assessments and/or opinions.

The securities reflected herein are intended for illustrative purposes only and not a recommendation to buy or sell specific securities. There is no assurance that the securities discussed will remain in the portfolio or that securities sold have not been repurchased. The securities discussed do not represent the entire portfolio, may only represent a small portion of the portfolio and should not assume the securities discussed were or will be profitable or that recommendations made in the future will be profitable or will equal the performance of the securities discussed. H&W’s opinions regarding these securities are subject to change at any time, for any reason, without notice.

Holdings and attribution analysis are based on a representative portfolio of the High Yield strategy, which may vary by portfolio due to different restrictions, cash flows, and other relevant considerations. Performance attribution is an analysis of the portfolio's return (gross of fees) relative to the benchmark, is calculated using trade information, and does not reflect cash flow transactions and the payment of transaction costs, fees and expenses.

The portfolio manager’s views on the high yield market should not be construed as the high yield strategy’s expected performance. There is no guarantee of the future performance of the high yield market, nor the high yield strategy. H&W does not provide any assurance that the high yield strategy’s objectives and goals will be achieved. The High Yield strategy’s benchmark refers to the ICE BofA BB-B U.S. High Yield Constrained Index. Unless otherwise noted, the high yield market refers to the ICE BofA U.S. High Yield Index. The ICE BofA U.S. High Yield Index tracks the performance of below investment grade, but not in default, US dollar-denominated corporate bonds publicly issued in the US domestic market, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P.

Investing in high yield securities is subject to certain risks, including market, credit, liquidity, issuer, interest-rate, inflation, and derivatives risks. Lower-rated and non-rated securities involve greater risk than higher-rated securities. Investments in debt securities typically decreases in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investing in smaller and/or newer companies involves greater risks than those associated with investing in larger companies, such as business risk, significant stock price fluctuations and illiquidity.

Market Disruption: The global coronavirus pandemic has caused disruption in the global economy and extreme fluctuations in global capital and financial markets. H&W is unable to predict the impact caused by coronavirus pandemic, which has the potential to negatively impact the firm’s investment strategies and investment opportunities.

©2022 Hotchkis & Wiley. All rights reserved. No portion of the podcast may be published, reproduced, transmitted or rebroadcast in any form without the express written permission of H&W.

Past performance is not indicative of future performance.