Penn Mutual Asset Management’s investment philosophy centers on the belief that valuation is the source of superior returns. Related decision-making may also be optimized when executed through the lens of rigorous risk management.
This philosophy combines a top-down macroeconomic view with bottom-up credit view. It also considers the technical factors in the marketplace that influence pricing and performance. These three broad components -- Macro, Credit, and Technical (MCT) -- provide the analytical framework to execute strategic and tactical asset allocation, security selection, and position-sizing.
Each component of MCT is continuously defined and measured by its contribution to expected return and risk within the Investment Portfolio.
Top-down Macroeconomic View
A macroeconomic view drives decisions relating to risk weighting, positioning from a duration and curve perspective, and desired strategic asset allocation.
- Focus on economic conditions such as growth, inflation, fiscal and federal monetary policy, major secular themes
- Considers rate/real rate/ inflation, yield curve, risk premium, volatility/ skew/correlation
Bottom-up Credit Analysis
Credit analysis generates ideas surrounding sector allocation and security selection.
- Focus on debt coverage ratios, leverage industry concentration, competitive position, capital usage, balance sheet strength, margin, growth potential and barriers to entry
- Considers credit spread/spread curve, spread volatility, relative value to historical, relative value to peers
Technical Factors
The consideration of technical factors generates ideas related to the best instruments to execute strategies, and entry/exit opportunities.
- Focus on relative and absolute levels of valuation in the cash bond and derivative markets
- Considers drivers of pricing among fixed income assets caused by supply/demand imbalances, market sentiment and market positioning
Tags: Viewpoints | Investment strategy | Macroeconomics | Credit analysis | Portfolio
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Disclosure Statement
The material provided here is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management.
This material is for informational use only. The views expressed are those of the author, and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice. The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete. Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements. Actual results may differ significantly. Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.
Investing involves risk, including possible loss of principal. Past performance is no guarantee of future results. All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.
High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.
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