The outlook for investment grade (IG) corporate credit is more favorable than it has been in a decade. The yield, duration and credit quality foundation provide an opportunity to construct a high-quality portfolio with a positively skewed return profile with the potential to generate high single-digit returns while running limited downside risk. In this paper, Robert Cohen, Director of the Global Developed Credit team at DoubleLine Capital, and Product Specialist Colin Callahan explore the key ingredients in this outlook: yield per unit of duration, all-in yields, credit spreads and rating migration. Then they review the widespread use of longer-term financing by IG issuers during the years of historically low borrowing costs and its significance as an offsetting mitigant of refinancing risk around the timing of debt “maturity walls,” a colloquial term for when maturities arrive en masse. Finally, Messrs. Cohen and Callahan break down select sectors of this investment universe into positive and negative outlooks.
Mr. Cohen joined DoubleLine’s Global Developed Credit (“GDC”) Group in 2012. He is a Portfolio Manager and the Director of the GDC group. He is also a permanent member of the Fixed Income Asset Allocation Committee. Prior to DoubleLine, Mr. Cohen was a Senior Credit Analyst at West Gate Horizons Advisors (and its predecessor ING Capital Advisors) where he worked as an Analyst covering bank loans and high yield bonds. Prior to ING, he was an Assistant Vice President in the Asset Management Group of Union Bank where he managed a diversified portfolio of leveraged loans as well as a portfolio of CDO securities. Previous to Union Bank, he was an Associate Director of Corporate and Investment Banking at the Bank of Montreal in its Natural Resources Group. Mr. Cohen holds a B.A. in Economics from the University of Arizona and an MBA from the University of Southern California. He is a CFA® charterholder.
