Post’s Investment Strategies
Post specializes in the management of high yield securities. Our investment process has remained consistent since the inception of the firm and is based on a bottom-up, research intensive portfolio construction methodology that captures both income generation and capital appreciation to maximize investment opportunities. We utilize the same rigorous security selection process for every investment, and our philosophy of value identification, downside protection and risk management is applied to all market sectors. Our customized approach allows us structure the right products to fit our clients’ needs. We offer several products and strategies with a variety of risk/reward profiles.
Investment Philosophy
Post’s goal from inception has been to outperform the market over a market cycle with below market volatility. We believe that superior performance is achieved through the consistent identification of three specific attributes: (i) Value Identification, (ii) Downside Protection and (iii) Risk Diversification.
Value Identification: Our investment process begins with identifying industries, companies and management teams that we may be interested in investing in. Our investment professionals then undertake a rigorous analysis of industry and company fundamentals, as well as capital structures and available securities. This process involves intensive due diligence and detailed modeling of various risk/reward scenarios. We seek out complex and under-rated credits and look for catalysts which we believe will enable the security to outperform the market. Once the investment professionals have completed this analysis, the PMs select the companies which we believe have the most attractive risk/reward profile.
Downside Protection: We believe one of the crucial components of outperformance is to not lose money due to credit degradation. All companies have business risks and, depending on leverage, financial risk. In combination, they can be lethal. Avoiding the downside requires intensive research and modeling of various downside scenarios. It involves actively following company, industry and market events. It also involves understanding corporate structures and bond covenants that may protect the investor. In addition, we look for tangible and hidden assets that may provide additional downside protection.
Risk Management: Our risk management approach is focused on minimizing the three major risks in high yield: credit risk, interest rate risk and concentration risk. We seek to mitigate credit risk, the most crucial, with our disciplined investment process and a clear focus on downside protection. Interest rate risk is reduced by structuring the portfolio to have an average life and average duration shorter than the index. We strive to curtail concentration risk by keeping exposure to any one industry or any one company below 15% and 5%, respectively (in practice, we generally don’t exceed 10% and 2%), subject to client guidelines.
Customized Approach
We don’t just manage accounts, we work closely with our clients to structure investment products that meet their investment objectives, allocation criteria and risk management requirements. Post, as a firm, is committed to building lasting relationships and fostering communication with our clients. Clients have extensive interaction with not only our client services team, but the PMs and investment team as well. We believe transparency and open dialogue create the foundation for strong client relationships.
Post offers several strategies with a variety of risk/reward profiles: Traditional High Yield, High Yield Plus, Limited Term High Yield, Global Limited Term High Yield, and Intermediate Term High Yield. Clients may invest in a number of vehicles, including separate account mandates, on and offshore private fund vehicles and separately managed limited partnerships. Post crafts tailor-made solutions, realizing each client is unique with unique objectives and risk metrics. We are committed to providing clients with investment products that best suit individual needs.
Our clients span across many different industries, sectors and countries. They include public and private pension funds, endowments, foundations, corporations, and high-net-worth individuals.
Products
Traditional: Post has managed its Traditional High Yield Strategy since 1993. Our Traditional High Yield Strategy carries the lowest risk of our index-like products. Investments in this strategy primarily include a diversified portfolio of value-oriented high yield securities including notes, bonds, bank loans and private debt of companies domiciled in the U.S., Canada and Western Europe. We generally have a volatility, average life and duration less than the benchmark.
High Yield Plus: The High Yield Plus Strategy has been employed by Post since 1992. It is a tactical combination of high quality, medium quality, and lower quality high yield issues. The High Yield Plus Strategy invests primarily public and private issue debt securities, bank debt, “stressed” securities, private debt and non-U.S. investments.
Limited Term: The Post Limited Term Strategy was expanded in November 2009, but dates back to 2002. The Limited Term Strategy invests in a portfolio of short-term, lower volatility, high yield debt. Because the market is primarily focused on outperforming a seven-year index, the Limited Term segment is chronically undervalued, in our view. In addition, we believe volatility is invariably lower. We invest in a diversified portfolio of high yield securities, including domestic and foreign corporate bonds, bank debt, and busted convertible bonds. The strategy primarily invests in “called” bonds, “tendered” bonds, maturing bonds, puttable bonds, callable bonds, company buy-backs and anticipated take-outs.
Post’s main vehicles in this strategy are the Post Limited Term High Yield Fund (a domestic fund with an offshore sleeve) and the Post Global Limited Term High Yield Fund (a UCITS fund).
Intermediate Term: Post’s Intermediate Term High Yield Strategy launched in January. This strategy invests in a portfolio of short-to-intermediate term, lower volatility, high yield securities, including domestic and foreign corporate bonds, bank debt, bridge loans, and busted convertible bonds.