Advanced Fixed Income

Advanced Fixed Income means specialised investment strategies that supplement traditional investment strategies in the bond segment. Unlike traditional bond strategies, this type of investment is characterised by low duration risk and high earnings potential.

Lupus alpha offers two types of these specialised asset classes in the bond segment: collateralised loan obligations (CLOs) and global convertible bonds.

Our investment concept is aimed particularly at institutional investors looking for alternatives beyond government and corporate bonds in the ongoing low-interest-rate environment. Due to current market conditions, very few traditional investment strategies in the bond segment offer an attractive risk/return profile. Adding specialised asset classes increases the earnings potential of institutional portfolios and efficiently improves diversification while keeping duration risk low. 

2

SPECIALIST TEAMS

with a long-standing track record in CLOs and convertible bonds

18

YEARS OF EXPERIENCE

in portfolio management of CLOs and convertible bonds

100%

ACTIVE MANAGEMENT

Neither strategy can be passively implemented

Advanced Fixed Income with Lupus alpha?

Collateralized Loan Obligations (CLOs)

CLOs are securitised loan portfolios that mainly consist of senior secured corporate loans. These loans are secured against all of a company's assets and, unlike corporate bonds, are given priority in the event of default.

CLOs therefore offer indirect access to the market for private corporate financing. They have the same rating as corporate bonds but consistently provide higher yields—and they have historically low default rates. Due to their variable interest rates, they have little interest-rate sensitivity.

As with all securitisations, CLOs are divided into tranches with different ratings and credit quality. The securitisation structure allows investors to acquire CLO tranches with different ratings, depending on their appetite for risk and return. The spectrum ranges from senior through mezzanine to the unrated equity tranche. 

This means that CLOs are in demand from various investor groups with differing objectives and regulatory requirements. Lupus alpha offers various solutions based on CLOs to meet the differing requirements of investors.

Global convertible bonds 

Convertible bonds are hybrid securities. They combine the strengths of two asset classes and are essentially bonds with an equity call option. They are debentures with a fixed interest rate that can be converted into equities within a specified period at a pre-set rate. One key feature of convertible bonds is that they are more reactive to rising share prices than to negative trends. This asymmetric risk/return profile (convexity) offers investors the opportunity to participate in upside potential on the equity markets while limiting possible losses due to its bond-like nature. 

Like small & mid caps, convertible bonds provide opportunities offered by information inefficiencies in a niche market. They offer investors multiple alpha sources. The various performance drivers include price trends in the underlying equity, the coupon and the credit spread (difference in yield compared to a risk-free bond with the same maturity) and structural features such as contractual safeguard clauses against capital dilution or takeover. Alongside an investment in blue chips, they also provide access to smaller and medium-sized companies that are under-represented in the bond market and thus offer additional diversification. 

We take performance personally 

With us, investors know which experienced, skilled fund manager is responsible for the performance of each fund.