Federated Hermes has launched a fixed income fund that integrates environmental, social and governance factors.
The Federated Hermes US High Yield Credit Ucits fund is managed by senior portfolio manager Mark Durbiano. It aims to achieve strong, consistent performance through a bottom-up investment approach.
The fund will focus on the quality of an issuer’s underlying business, combining qualitative and quantitative analysis to target companies with stable and predictable free cash flow.
The firm’s 14-member high-yield credit team will engage directly with the companies they invest in to gain a more comprehensive view of ESG risks. The team currently manages about $10.5bn in assets within the Federated US high-yield portfolio.
‘Our approach to quality focuses on a company’s ability to service its debt, while a rating agency’s assessment of quality focuses on absolute leverage,’ said Durbiano.
‘We believe that this divergent approach creates an inefficient market and provides an opportunity to generate attractive excess and risk-adjusted returns,’ he added.
Another fund that Durbiano manages is the Federated Hermes High Income Advantage that is available to investors in Hong Kong.
This fund invests primarily in a portfolio of debt securities that are expected to be lower-rated corporate debt obligations, and some may involve equity features.