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Rob Burn
Rob Burn
CFA
Fixed Income Portfolio Manager

Industry experience

With Wellington

14
14

As a fixed income portfolio manager, Rob develops strategic and tactical investment strategies using both fundamental and quantitative analysis and implements those strategies in portfolios. He also focuses on portfolio construction and risk management, and is a member of the Broad Markets Team.

 

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For fixed income investors, varying the amount of credit risk in your portfolio can exert a major influence on the portfolio’s realized alpha. Indeed, historical data shows that this single factor can have a larger impact than decisions around what bond sectors or individual issuers to invest in. Accordingly, it’s worth spending some time thinking about precisely how much credit risk to take and when. My latest research in this area focuses on the role that valuation can play in adjusting credit risk over an economic cycle.

Methodology at a glance

I looked at the strategic timing of buying and selling credit exposure (in the form of corporate bonds, using cash or US Treasuries as a funding source) with low turnover, and using market valuation as the sole buy/sell signal. There are, of course, other predictive drivers of credit returns, such as…

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Robert Burn
Rob Burn
CFA
Fixed Income Portfolio Manager
Boston
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In my August 2020 blog post, I highlighted a potentially compelling return opportunity in the often-scorned universe of “fallen angels” — formerly investment-grade-rated corporate bonds whose ratings have been downgraded to high-yield (i.e., below-investment-grade) status by major credit rating agencies. I noted that, within two years of being thus downgraded, fallen angels as a group have handily outperformed the broader US high-yield index (and all three of its quality subgroups) over the long term.

Fast forward to early 2021: What I call the “fallen-angel effect” appears to have lost none of its luster. And notably, my latest research revealed that it’s not limited to just…

MARKETS
Robert Burn
Rob Burn
CFA
Fixed Income Portfolio Manager
Boston

The term “fallen angels” has always carried a somewhat pejorative connotation among fixed income investors. In some instances, that may well be justified, but not always. Indeed, particularly in today’s environment, I believe discerning investors may be able to uncover attractive value in the often-scorned universe of fallen angels.

Lay of the land

  • Fallen angels are formerly investment-grade-rated corporate bonds whose ratings have been downgraded to high yield (i.e., below investment grade) by major rating agencies.
  • Within two years of being thus downgraded, fallen angels as a group have meaningfully outperformed the broader high-yield index and all three quality subgroups (Figure 1).
  • Some of fallen angels’ excess return versus the index was attributable to…
MARKETS
Robert Burn
Rob Burn
CFA
Fixed Income Portfolio Manager
Boston
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