Emerging Markets

Our dedicated emerging markets team invests primarily in fixed income securities of issuers domiciled in developing countries on a worldwide basis. Investments may include:

 

§          Sovereign, agency and corporate bonds

§          Bank loans

§          Convertible securities

§          Promissory Notes

§          Bank Guarantees

§          Certificate of Deposits

§          Local Currency Treasury Bills

§          Distressed Debt

The cornerstone of our emerging markets investment approach is an independent research process, combined with focused analysis of issuer credit and security valuation. Additionally, we apply thoughtful risk management disciplines to our investment process.

Investment Grade and High Yield

Our Investment Grade and High Yield Team take a credit-intensive approach to the selection of investment grade and high yield securities for our principal transactions. When constructing a proprietary trading book we determine where favourable value exists within markets based upon three criteria;

 

1.       a fundamental, bottom-up analysis of individual investments,

2.       a top-down analysis of market and sectors, and

3.       an assessment of how they compare on a relative value basis to other investment alternatives.

 

We focus on company and industry analysis, with particular attention paid to:

 

§          free cash flow generation capability

§          the quality of management

§          capital structure

We believe in prudent diversification as a critical safeguard against the adverse events that may affect results under even the most disciplined investment approach

Investment Process

Our Investment grade and high yield process looks to add value through a sharp focus on credit research. We use company financial statements, industry publications, third-party research reports, and direct contact with those closest to the company to determine the soundness of an investment opportunity.

Our analytical process focuses on:

 

The Company

 

§          Thorough evaluation of fundamentals

§          Free cash flow/repayment ability

§          Strong balance sheet and hard asset coverage

§          Defensible business position

§          Management checks

The Industry

 

§          Emphasis on stable fundamentals

§          Typically underweight retail and deep cyclical

§          Avoid capital intensive, high growth industries

§          Legislative risks

§          M & A activity

 

The Issue

§          Seniority and capital structure

§          Covenants

§          Liquidity

§          Relative value vs. enterprise value

Credit Selection is driven by

 

§          Strength of fundamental investment thesis

§          Strength of company's competitive position

§          Favourable relative valuation

§          Positive credits check feedback (e.g., customers, suppliers, industry experts, etc.)

 

Leveraged Loans

 

Team Overview

The Bank Loan Team is led by a seasoned team of senior financial professionals, with a combined 75 years experience in the Global Financial Services Industry. Supporting this group are dedicated teams of investment, analytical, and operational professionals. Together, the Bank Loan Team has achieved much success managing leveraged loans through different credit environments.

Investment Philosophy

The Bank Loan Team seeks to achieve superior, risk-adjusted returns from leveraged loan portfolios built through disciplined credit selection and prudent risk diversification.

This goal is pursued through our focused decision process, which is based on the following principles:

Fundamental Credit Analysis

 

§          Business model rationale

§          Management/sponsor strength

§          Cash flow strength

§          Enterprise value

§          Competitive advantages

§          Credit risk profile

§          Capital structure characteristics

 

Total Return and Relative Value Analysis

 

§          Industry comparisons

§          Market comparisons

§          Capital Structure components

§          Return v. Portfolio parameters

 

Market Liquidity Analysis

 

§          Historical trading patterns

§          Price Premiums/Discounts to par

§          Market Depth

§          Liquidity v. Portfolio Parameters

 

The Bank Loan Team has experience managing leveraged loans in a variety of structures, including CDOs, separate accounts, and various custom mandates.

Mezzanine Debt Securities

Mezzanine Debt offer a unique combination of a high-yielding fixed income security with the capital appreciation potential of an equity security.

Mezzanine Debt Characteristics

 

1.       Typically Subordinated Debt

2.       Capital proceeds used to support buyouts, recapitalizations or growth strategies

3.       Long-term maturities

4.       Returns generated through a combination of current income and equity participation -

conversion feature or warrants

5.       Covenants provide an early warning of declining performance

 

PCGC Group's Mezzanine Advantage

Discipline Investment Process

When we consider a potential investment, we employ a rigorous, bottom-up evaluation process.

 

Key factors assessed include:

 

§          Quality of a company's sponsor/shareholder group

§          Quality and depth of company management

§          Strength of business model

§          Drivers of past and future product or service demand

§          Market conditions and a company's competitive position

§          Customer, supplier and competitor perceptions of the company's products, services and management
Historical and projected financial statement

§          Company's need for additional capital

§          Potential exit opportunities

Constant Communication

Our active investment management approach to Mezzanine and Private Equity activities includes frequent and detailed communications with both sponsor groups and portfolio company management. Often, we will maintain board observation rights, which allow our investment professionals opportunities to review and consider strategic issues being faced by our portfolio companies.

Sensible Diversification

Additionally, we believe in prudent diversification across industries and sectors. We look to invest in companies where we perceive there to be low operating risks. These companies will typically have profitable track records and offer products and services that have little risk of becoming obsolete. We avoid companies with weak competitive positions or cyclical exposure.

Credit Related Securities

Strategy

We are actively seek relative value from Mortgage Backed Securities (MBS), Asset Backed Securities (ABS), Commercial Mortgage Backed Securities (CMBS), Mortgage related derivates and other types of collateralised debt obligations

 

Strengths

 

1.       Extensive experience in MBS, mortgage derivatives, ABS, and CMBS markets

2.       Risk management expertise and presence in derivatives markets

3.       State-of-the-art proprietary systems for identifying relative value, optimising portfolios, and controlling risks - built, tested and applied.

4.       Breadth of investment opportunities across PCGC Group, including private ABS and real estate structures