BNY Global SDHY Bond Fund: Less risky than you may think | Insight Investment

Even within the short-dated high yield category, we invest in a differentiated way to other managers, as our aim is to accurately forecast cashflows for the companies we invest in over our two-year investment horizon to ensure we are repaid within that period. If a company reports a deviation from our expectation, we seek to sell the position.

Like any labelling of a group of funds the detail is important. Some short-dated high yield funds are constrained by maturity, others are constrained by currency, some by index. Our constraint is focused entirely on the timing of the repayment of principal within two years. This imposes a discipline on analysts and portfolio managers to not only have a solid assessment of the credit today, but also a detailed financial model for how the business will perform over the two-year investment horizon.

Insight’s analysts meet with the companies we invest in up to six times a year, checking progress versus the detailed assumptions made at the time of investing. If any deviation from plan is highlighted, the investment thesis is reassessed, and the position sold if the repayment plan comes into doubt.

This strict investment and sell discipline reduces the margin for error. We cannot sit and wait for a turnaround in the story that may take us beyond the two-year horizon. We believe this discipline reduces portfolio risk and volatility.