FIAM Leveraged Loan

Fidelity has been actively managing leveraged loan portfolios for more than 25 years. Our global team's proprietary research—the foundation of our investment process—offers greater insight into a company's fundamentals and capital structure to mitigate downside risk potential.

Leveraged loan market inefficiencies allow us to capitalize on our competitive advantages:

  • Size and scale: large capital market presence and access to new issue market
  • A team approach: multiple perspectives, supported by dedicated analysts and traders experienced in over-the-counter debt markets
  • Risk management: proprietary multi-factor quantitative risk measurement tools and techniques

An investment process driven by our global research platform, company access, and intense focus

IndustryCompanyCapitalStructureValuationInvestmentDecision• Organic growthprospects• Competitivedynamics• ROIC potential• Degree ofcyclicality• Legal andregulatoryconsiderations• Pace of change• Likelihood ofevent risk• Managementcompetence• Strategy andpositioning• Source ofcompetitiveadvantage/moat• Consistency ofprofitability• Reinvestmentopportunities• Financialprojections• Organic de-leveringprospects• Financial policyand alignment ofstakeholderinterests• Liquidity• Covenants andstructuralprotections• Organizationalstructure• Total returnpotential• Risk/rewardtrade-off• Downsideprotection• Pricing relative toother securities• Collateral valuation• Collaborativeprocess withtrading, research,and portfoliomanagement• Constant andongoing monitoringof company,industry, andsecurityfundamentals

Key Facts

Composite inception May 31, 2007
Investment discipline Senior Bank Loans
Style focus Fundamental
Benchmark S&P/LSTA Leveraged Loan Index
Target excess return (bps)† 100–200
Expected tracking error (bps) 100–300

Objective

Seeks to outperform the S&P/LSTA Leveraged Loan Index by primarily investing in a diversified portfolio of higher-quality speculative-grade bank loans.

Investment Philosophy and Approach

We believe leveraged loan markets are inefficient and that companies with improving credit profiles will outperform over time. The key aspects of our approach are:

  • Bottom-up, fundamental research: Rigorous, in-depth analysis encompasses company, industry, capital structure, and valuation components to target the best risk-adjusted opportunities in the market.
  • Total return mindset: Balances income and capital appreciation to achieve competitive risk-adjusted returns over a credit cycle.

We believe our focus on fundamental credit analysis and relative valuation is the key to outperformance.

Portfolio Managers

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† Target excess return is presented gross of any fees and expenses, including advisory fees, which when deducted will reduce returns. Although FIAM believes it has a reasonable basis for any gross excess returns, there can be no assurance that actual results will be comparable. Actual results will depend on market conditions over a full market cycle and any developments that may affect these investments, and will be reduced by the deduction of any fees and expenses associated with the investment.

Chartered Financial Analyst (CFA®) designation is offered by the CFA Institute. To obtain the CFA charter, candidates must pass three exams demonstrating their competence, integrity, and extensive knowledge in accounting, ethical and professional standards, economics, portfolio management, and security analysis, and must also have at least four years of qualifying work experience, among other requirements.

 
 

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