High Yield SMA

Fixed Income

Investment Strategy

Denver Investments’ High Yield SMA strategy is based on the belief that consistent, strong risk-adjusted returns are best achieved through an emphasis on income rather than short-term market timing. Using a relative value strategy, the team seeks to deliver alpha primarily through security and sector selection and, secondarily, through portfolio level decisions. Using a collaborative approach grounded in proprietary research, the team constructs a diversified portfolio while adhering to its risk control measures.

This strategy is also available as an institutional high yield strategy and a high yield mutual fund offering.

Portfolio Management

Our investment process demands rigorous fundamental credit analysis, the application of which within the high yield market logically results in a large allocation to higher-rated issuers that we believe provide advantageous return potential with less expected volatility. – Troy A. Johnson, CFA

Troy A. Johnson, CFA

Troy A. Johnson, CFA

Partner, Portfolio Manager, Analyst

Gregory M. Shea, CFA

Gregory M. Shea, CFA

Partner, Portfolio Manager, Credit Research Analyst

 
Benchmark:

Bloomberg Barclays U.S. Corporate High Yield Ba Bond Index

Investment Minimum:

$500,000

Investment Team

Troy A. Johnson, CFA
Troy A. Johnson, CFA

Partner, Portfolio Manager, Analyst

2007 to Present: Denver Investments
2002 to 2007: Quixote Capital Management, Portfolio Manager and Analyst
1993 to 2002: Invesco Funds Group, Inc., Senior Fixed Income Analyst
Education:

BS – Montana State University; MS – University of Wisconsin
Member of CFA Institute and CFA Society of Colorado

Gregory M. Shea, CFA
Gregory M. Shea, CFA

Partner, Portfolio Manager, Credit Research Analyst

2008 to Present: Denver Investments
2004 to 2008: Lehman Brothers Asset Management, High Yield Credit Analyst
2003 to 2004: Banc of America Securities, Investment Banking Analyst
2001 to 2003: Bank of America, Bank Credit Analyst
Education:

BS & MSBA – Washington University
Member of CFA Institute and CFA Society Colorado

Nicholas J. Foley
Nicholas J. Foley

Vice President, Portfolio Manager, Municipal Credit Analyst/Trader

2012 to Present: Denver Investments
2010 to 2011: Bank of the West/BNP Paribas Group, Associate Portfolio Manager and Lead Fixed Income Trader
2009 to 2010: Janus Capital Group, Financial Analyst
2004 to 2008: Washington Mutual Bank, Senior Analyst
Education:

BA - Gonzaga University

Kenneth A. Harris, CFA
Kenneth A. Harris, CFA

Partner, Director of Fixed Income Portfolio Management, Portfolio Manager

2000 to Present: Denver Investments
1985 to 1999: Blue Cross and Blue Shield of Colorado, Treasurer
Education:

BBA – University of Arizona; MBA – University of Colorado at Denver
Member of CFA Institute and CFA Society Colorado

Darren G. Hewitson, CFA
Darren G. Hewitson, CFA

Partner, Portfolio Manager

2008 to Present: Denver Investments
2008: 180 Connect, Accountant
2007: Munro & Noble Solicitors and Estate Agents, Accountant
Education:

BAcc – University of Glasgow, Scotland
Member of CFA Institute and CFA Society Colorado

Steven G. Kindred, CFA, CPA
Steven G. Kindred, CFA, CPA

Vice President, Credit Research Analyst

2009 to Present: Denver Investments
2008 to 2009: Janus Capital Group, Equity Research Analyst
2007: Wasatch Advisors, Equity Analyst Intern
2003 to 2006: Deloitte & Touche LLP, Senior Auditor
Education:

BS and MAcc – Utah State University; MBA - Dartmouth College
Member of CFA Institute and CFA Society Colorado

William Oh, CFA, FRM
William Oh, CFA, FRM

Vice President, Securitized Debt Analyst/Trader

2012 to Present: Denver Investments
2010 to 2011: Nationwide Insurance, Finance Leadership Rotation Program
2009 to 2010: AEGON USA Investment Management, Corporate Credit Strategy Intern
2004 to 2008: One West Bank (Formerly Indymac Bank), Assistant Vice President, Buy-Side MBS & Whole Loan Trader
2002 to 2004: Bear Stearns Residential Mortgage, Business Development Analyst
2001 to 2002: Wells Fargo Bank, Premier Banking Officer and Trust Account Manager
Education:

BA – Claremont McKenna College; MBA – The University of Chicago
Member of CFA Institute and CFA Society Colorado

Daniel T. Schniedwind, CFA
Daniel T. Schniedwind, CFA

Vice President, Credit Research Analyst

2014 to Present: Denver Investments
2011 to 2014: AMI Asset Management, Credit Analyst
2010 to 2011: Mars Hill Partners, Analyst
2009: Oppenheimer & Co., Sales and Trading Intern
Education:

BA – Whittier College; MS – Indiana University
Member of CFA Institute and CFA Society Colorado

Daofu (Nick) Yu, CFA
Daofu (Nick) Yu, CFA

Vice President, Credit Research Analyst

2016 to Present: Denver Investments
2013 to 2016: Great West Financial, Credit Analyst/Portfolio Manager
2012 to 2013: Western Union, Foreign Exchange Trader
2011 to 2012: D.A. Davidson and Company, Research Associate
2006 to 2009: Oppenheimer Funds, Business Analyst-Operations
Education:

BS – University of Colorado; MS and MBA - University of Colorado at Denver
Member of CFA Institute and CFA Society Colorado

Drew D. Conrad, CFA
Drew D. Conrad, CFA

Vice President, Fixed Income Trader

2010 to Present: Denver Investments
2006 to 2008: SCM Advisors, High Yield and Leveraged Loan Trader and Analyst
2001 to 2006: AIG Investment Management, Fixed Income Analyst and High Yield Trader
Education:

BA – Rice University
Member of CFA Institute and CFA Society Colorado

Nicole J. Foote
Nicole J. Foote

Fixed Income Portfolio Administrator

2015 to Present: Denver Investments
2009 to 2014: Shenkman Capital Management, Client Service Associate, Portfolio Administrator
2008 to 2009: GE Asset Management, Trade Operations Specialist
2008: Evaluation Associates, Performance Analyst
2004 to 2008: Clayton Holdings, Senior Operations Analyst
Education:

BS – Colorado State University; MBA – University of Connecticut

Manager Commentary as of 12/31/2017

 

Market Overview

The fourth quarter did not disappoint on the news front. In October, the Federal Reserve moved forward on its plan to very gradually shrink its balance sheet, interest rate volatility returned to the market, oil prices reached multi-year highs, the Federal Reserve raised rates another 25 basis points (0.25%) as was widely anticipated, and on December 22, 2017, President Trump signed much-anticipated tax reduction legislation. Fundamentals in the high-yield market remained stable in the quarter, as evidenced by the trailing twelve-month high-yield issuer default rate, which fell further in the quarter from 3.67% to 3.55%. The Bloomberg Barclays U.S. Corporate High Yield Index returned a modest 0.47%. Looking at returns from different high-yield industry sectors, it is apparent that the market has been choosing winners and losers in today’s economy. On the losing side were the telecommunications, cable & satellite, and health care sectors, while the winners included the utilities, energy, and transportation sectors. In the telecom sector, the accelerating trend toward “cutting the cord” has continued to pressure many of the traditional telecommunications providers. With U.S. equities returning 6.34% in the quarter, as measured by the Russell 3000® Index, it was unsurprising that the Bloomberg Barclays U.S. Corporate High Yield Caa Index was the best high-yield performer for the quarter with its 1.02% return. This exceeded the gains of both the Bloomberg Barclays U.S. Corporate High Yield Ba Index and the Bloomberg Barclays U.S. Corporate High Yield B Index, which produced 0.39% and 0.36%, respectively.   

Outlook and Positioning

As of quarter-end, high-yield credit spreads were about 20 basis points (0.20%) from the post-2008 lows established in mid-2014. The recent passage of tax reduction legislation will likely help to boost growth over the next two to three years due to increased business capital investment and wage increases being passed on to workers. However, given the absolute level credit spreads today compared to historical levels, and recognizing that we are late in an already extended credit cycle, we have positioned the portfolio to go on the offensive if dislocations occur and the situation warrants.

We position the portfolio with a longer-term investment orientation and an emphasis on higher-quality high-yield bonds. The goal of which is reducing the portfolio’s volatility while providing solid risk-adjusted returns over time. Our process entails intensive credit analysis by which we evaluate yield versus risk through business cycles, and it follows that a larger weighting of higher-rated, high-yield issues is a logical result. Most importantly, we believe this strategy is suitable over the long term for shareholders who want comparative yield from a high-yield portfolio, but who are also more sensitive to volatility and more focused on capital preservation.

 

 

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will vary, and initial investments may be worth more or less than their original investment.

The Manager Commentaries contain certain forward-looking statements about the factors that may affect future performance. These statements are based on portfolio management’s predictions and expectations concerning certain future events and their expected impact on the strategy, such as performance of the economy as a whole and of specific industry sectors, changes in the levels of interest rates, the impact of developing world events, and other factors that may influence the future performance of the strategy. Portfolio management believes these forward-looking statements to be reasonable, although they are inherently uncertain and difficult to predict. Actual events may cause adjustments in portfolio management strategies from those currently expected to be employed.

All indices are unmanaged and investors cannot invest directly in an index. View index descriptions.

To open a Denver Investments High Yield account, please review the following:

  1. Denver Investments Welcome Packet (account opening instructions, necessary documentation, contact information)
  2. Form ADV Part 2A (Brochure)
  3. Form ADV Part 2B (Brochure Supplement)

If you have any questions please call 800.734.9378 or email us.

SMA Services Group

Paul Laffrenzen
Matt Gunter
Ryan Johnston

For more information on our SMA strategies please call 800.734.9378 or email us your request below.

High Quality Junk Bonds - An Oxymoron or Opportunity?

Portfolio Manager Troy Johnson discusses the benefits of investing in higher-quality high yield bonds.

Changes at the Fed: A Focus on Monetary Policy

Denver Investments’ Fixed Income team discusses implications of the Fed’s monetary policy and what changes we should expect from the recently announced Fed Chair.

Fixed Income
Market Update -
January 2018

Read the latest insights on the fixed income market.

SMA Services Group

Paul Laffrenzen  |  Matt Gunter  |  Ryan Johnston
Phone: 800.734.9378

 

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