Podcast: Money Tree Investing Digs into High Yield Markets
Dave Breazzano talks why the perceived risk of credit default is higher when investing in high yield bonds & loans, but the reward can be too
Going beyond with the Polen High Yield Team
We are a specialized credit investment team that builds concentrated, actively managed portfolios of bonds and loans. Our goal is to deliver compelling investment returns over full market cycles by identifying areas of the leveraged credit market where we believe inefficiency signals opportunity. Our investment strategies are backed by extensive, bottom-up, fundamental research.
Our active, high-conviction approach aims to create a significant and durable yield advantage. By focusing on the companies that our research indicates have a margin of safety and the potential to grow into their balance sheets, we seek to reduce risk and amplify the benefits of yield premium compounding.
Expertise, Experience & Analysis
The Polen High Yield Team is comprised of proven credit specialists who apply a collaborative approach to strategy and security selection, focused on fundamental research and discerning analysis.
Located: Waltham, MA
Head of Team: David Breazzano
Average Team Member Experience: 18 years (as of 03-31-2023)
Our Investment Philosophy
Concentrated Portfolio: High-Conviction + Best Ideas
Risk Management: Margin of Safety Through Diligence
Hold Period: Compounding of Long-Term Yield Premium
Mispriced Risk: Structural inefficiencies create opportunities for active management
Flexibility: Investing across bonds and loans to capitalize on relative value opportunities
We believe non-investment grade, middle-market companies exist in an inefficient area of the market, providing us with a source of attractive investment opportunities.
—David Breazzano, Head of Team, Portfolio Manager
Polen High Yield Strategies
Our Strategic Approach
High Yield Investment Philosophy
We strive to generate attractive risk-adjusted returns by employing a disciplined, bottom-up, fundamentally-oriented investment process with a strict adherence to downside protection. Through rigorous due diligence with a strong emphasis on margin of safety, we believe that we can construct concentrated portfolios that can outperform broad high yield indices over a full credit cycle.
- We focus on identifying mispriced risk within the inefficient segments of the high yield market, where rating agency biases may create opportunities for discerning investors.
- Our focused coverage and long-term mindset enables our team of sector specialists to dedicate significant time and effort to monitoring existing investments and managing downside risk.
- We assess risk-reward through “loan-to-value” analysis and perform thorough legal due diligence, which is augmented by our in-house transactional attorney.
High Yield Investment Process
1: Leveraged Credit Universe
- 2,000+ issuers of high yield bonds, syndicated loans, and private debt
2: Sourcing
- Secondary debt securities
- Select primary issues
- Originate other investment opportunities
3: First Pass
- Classify investment thesis
- Sound initial risk-versus-reward
- Strong downside protection
4: Deep Dive
- Validate investment thesis
- Due diligence and competitive analysis
- Strong loan-to-value and legal protections
- ESG factors evaluated
5: Portfolio Construction
- Disciplined accumulation
- Overweight high-confidence positions
- Long-term investment mentality
6: Active Monitoring
- Regularly challenge thesis
- Adjust position weightings
- Proactive credit management
Recent High Yield Perspectives
Asset TV Masterclass: Why High Yield, Right Now
Watch Dave Breazzano talk credit markets & unlocking the most compelling yield opportunities seen in years
Beyond Fundamentals: Taking A Deeper Look at Credit Risk
Why there is often more to the story than agency ratings suggest
Beyond Fundamentals: High Yield’s Time to Shine?
Why we see a “Goldilocks” opportunity in the asset class
Citywire Due Diligence Report: High Yield 2023 Roundtable
Watch John Sherman, portfolio manager on Polen’s High Yield Team, share his outlook on the credit market & how he seeks to capitalize on its inefficiencies
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A Collaborative & Research Driven Team
Polen Capital Credit, LLC, a wholly-owned subsidiary of Polen Capital Management, LLC, is an investment adviser registered with the SEC. Please find Polen Capital Credit, LLC ‘s Form ADV linked here.
The information is provided for illustrative purposes only. Opinions and views expressed constitute the judgment of Polen Capital as of the period indicated, may involve a number of assumptions and estimates which are not guaranteed and are subject to change without update. Although the information and any opinions or views given have been obtained from or based on sources believed to be reliable, no warranty or representation is made as to their correctness, completeness, or accuracy. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without update, including any forward-looking estimates or statements which are based on certain expectations and assumptions. The views and strategies described may not be suitable for all clients. This information does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction.