- Growth in the asset-backed securities (ABS) market over the past 10 years has provided diversification and strong risk-reward characteristics in a sector largely ignored by the Bloomberg Barclays U.S. Aggregate Index.
- As growth in some historic sectors of the ABS market slows, the emergence of new securitization sectors has expanded the opportunities available to investors.
- The Diamond Hill fixed income team is able to exploit some of the pricing inefficiencies in the ABS market through our bottom-up analysis, along with our deep understanding of deal structures and the companies bringing them to market.
Portfolio Manager John McClain, CFA, joins us to discuss recent developments in the high yield market and how volatility can provide opportunity for investors focused on security selection. After the difficulties of the previous month and the rough start to November, our high yield team believes that opportunities have been uncovered if investors focus on long term fundamentals.
- The high yield market has come a long way since its creation in the early 1970s, evolving from a tactical asset class to a significant component of investors’ asset allocation.
- Dispelling the myths around the asset class is key to understanding the opportunity and value provided by high yield corporate credit.
- Understanding the nuances of the high yield market can provide investors with exposure to the asset class while potentially avoiding some of the pitfalls of benchmark construction and ETFs.