Man High Yield Opportunities
Previously the Man GLG High Yield Opportunities fund
Man High Yield Opportunities is an unconstrained, concentrated global high yield bond fund, driven by individual bond selection, but guided by top-down thematic ideas. Manager Mike Scott is ably supported by a team of internal credit analysts who conduct a rigorous analysis of every potential holding and their ability to meet debt obligations. Mike is very experienced and has an excellent track record in navigating the extra risk in the sector whilst achieving above average returns.
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Mike Scott is a Portfolio Manager at Man GLG. He began his career at Cazenove Capital Management in 2005 and moved to Schroders in 2006, where he spent four years as a European industrials credit analyst before becoming the lead high-yield portfolio manager. Mike graduated from the University of Oxford and is a CFA Charterholder.
Mike Scott is a Portfolio Manager at Man GLG. He began his career at Cazenove Capital Management in 2005 and moved to Schroders in 2006, where he spent four years as a European industrials credit analyst before becoming the lead high-yield portfolio manager. Mike graduated from the University of Oxford and is a CFA Charterholder.
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Company Description
GLG, a member of Man Group since 2010, is listed in the UK, USA, Switzerland and Hong Kong. With an on-the-ground presence in key markets, GLG delivers investment strategies across various asset classes, sectors and geographies. GLG funds were rebranded in August 2015 to Man GLG. The group was awarded the Elite Equities Provider Rating each year from 2016 to 2020.
Fund Performance
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Quote from the Fund Manager
A key to the success of our fund is captured by a quote from Warren Buffett, ‘…Be fearful when others are greedy. Be greedy when others are fearful.’ We manage our fund in line with this philosophy and rotate across the spectrum to take advantage of opportunities through a credit cycle.
Mike Scott
Lead Manager
Investment process
Man High Yield Opportunities is an unconstrained global high yield bond fund. Mike has a ‘go anywhere’ approach and looks for mispriced opportunities from across the speculative end of the market and trades them, both buying opportunities he thinks are too cheap, and also shorting some he thinks are too expensive, enabling him to profit when the price falls.
Mike achieves this through bottom-up stock selection, but with each idea assessed through a top-down lens. In practice, this means he finds interesting opportunities first, then sees what macroeconomic trends would help or hurt them.
His investment universe starts with around 1500 names. This is initially reduced through a series of quantitative metrics to find attractively priced ideas which consists of around 150-200 names. From this list, Mike will conduct a more thorough analysis, to focus the names to a watchlist of 100-150 with good fundamentals on an individual basis and macro tailwinds to support a recovery in price. This also entails analysis on the wider credit environment, studying factors such as consumer trends and regulation.
The final portfolio will consists of around 60-80 names, based on the strength of their fundamentals. These positions will be weighted depending on how compelling the opportunity set is, with reference to which sector or country they are in, the liquidity (how easy it is to buy or sell), the seniority of the debt and what difference each idea will make to the rest of the portfolio. Mike doesn’t wish to be concentrated into one area or be exposed to one factor. He wishes to have a diverse range of ideas to enable a portfolio that can benefit in all backdrops.
The typical holding period is around one year, so positions can turn around quickly, especially in the more opportunistic trades, which gives an overall portfolio turnover of around 75-80%.
At least two thirds of the fund will need to be in sub investment grade bonds. Mike wants a diverse range of return drivers and therefore will have a spread of global opportunities, albeit with a natural preference for UK, North American and European markets. The fund will be at least 80% hedged back to sterling.
Risk
Mike has the support of a risk management team to identify what risks the fund is taking, with daily reports on liquidity, market risk and credit profiles. Mike is happy to run one of the riskier funds in the sector, buying distressed bonds low down the credit spectrum but with a chance of recovery. The flexibility of his mandate means he can take a lot diversification with his holdings, which should help spread the risks. He can also short bonds which does add to the overall risk profile of the fund, though should enable it to benefit somewhat in falling markets.
ESG
ESG - Integrated
Whilst Man Group has a firm-wide exclusions list as a minimum set of standards for investing, this fund goes beyond the minimum and excludes the following from its investments: banned weapons (eg. cluster munitions), nuclear weapons, tobacco and coal-based production and energy. This screening is based on third-party data and overseen by an independent committee.
Beyond this, Mike has a two-level approach for integrating ESG issues. First, he has built ESG considerations into the investment process. He looks at each stock on an individual basis and, whilst doing this, he considers ESG risk factors alongside more traditional finance metrics. The primary focus here is governance which has the most impact in the world of fixed income. The second level of ESG is within the thematic overlay. Here, Mike looks at wider industry and market factors from which he will identify themes that could have an impact on a company such as increased regulation or decreasing demand. As Mike has a higher turnover approach and factors these longer-term risks into his analysis, there may be companies from sectors that some investors could be opposed to, but Mike sees as leaders in terms of improvement in their field.
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