We recently caught up with Sandy Liang, President, Purpose Investments Partners, and high-yield fixed income portfolio manager. Sandy's exemplary career on both the buy-side and sell-side in equities, and more notably in high yield, on Wall Street. have earned him a reputation as a shrewd, no-nonsense high yield and corporate bond portfolio manager.
As a preamble to our discussion about where the opportunities are in high yield and corporate fixed income space, we talked about Sandy's background, notably, his front row seat at the financial crisis, when he was a Senior Managing Director at Bear Stearns. A former Wall Street analyst and 7-time member of Institutional Investor Magazine’s All-American Fixed Research Team, he is resolute about putting asset protection first.
In part 1, Sandy shares the tenets of his investment philosophy, and his methodology for uncovering undiscovered, high yield opportunities in the high yield and corporate debt market market, citing examples from his fund holdings.
In part 2, Sandy talks about his thesis on credit risk vs. interest rate risk for investors seeking yield in a rising rates environment.
"Interest rate risk, or the risk of bond investments going down in value from a change in rates, is more worrisome right now than credit risk, or the risk that a company won’t be able to pay you back," says Sandy Liang.
"A great example of this is the Taper Tantrum of 2013. The beginning of the wind-down of QE in the U.S. at that time prompted an interest rate scare," says Liang. "In that calendar year, long-term Treasuries in the U.S. (maturities of 20+ years) lost investors 13%. Mid-term Treasuries (maturities of 7-10 years), meanwhile, lost investors 6%. The U.S. high yield corporate debt market, on the other hand, returned a positive 6% in the same period of time (source: Bloomberg, using ETFs TLT, IEF and HYG)."
What follows in this two-part podcast is an enlightening, eloquent and plain talking conversation with Sandy Liang, providing a clear-eyed view of how to benefit from investing in corporate credit and high yield in the current rising rate environment.