The case for global short-dated high yield | Insight Investment

Insight’s short-dated high yield strategy targets issues which will be repaid within a two-year time horizon. Ideally, these issuers are seeking to enhance their business in some way; this can take the form of selling an asset, buying a competitor, or undertaking capital investment such as building a factory or plant.

This activity will lead to an increase in the amount of cash generated by the company, either via increased revenue streams or from the proceeds of a sale. This additional cash can be used by the company to repay its debt, or to refinance its debt on more attractive terms.

This is how we get repaid in two years. In our view, this strategy can produce attractive levels of income while minimising earnings and default risk. Although Insight classifies a default as losing more than 50 points on an investment, more conservative than the traditional classification, we have experienced very few defaults since the inception of our strategy relative to the broader high yield universe.