April 5, 2022 | The Sherman Show

S12 E6: Robert Cohen on Steering Corporate Credit Through a Transitioning Economy

Robert Cohen, Director of DoubleLine’s Global Developed Credit team, comes on The Sherman Show to share his views across corporate credit: the investment-grade and high-yield bonds and leveraged loans. As he tells hosts Jeffrey Sherman and Samuel Lau (1:50), “Asset classes that had long duration suffered damage in 2022. I feel like that was in the beginning of the year, and we’re in a point now where there’s a handing-off of the baton from worrying about rates and how hawkish the Fed’s going to be – to now starting to be where are we going with growth.” As in 2020, Mr. Cohen expects (6:56) dispersion in credit performance in 2022. He foresees winners and losers, as growth slows amid rising inflation and outright shortages of goods and workers raising operational costs while rising interest rates raise financing costs. Cyclical companies and companies dependent on raw materials without the pricing power to pass along costs are at risk of becoming losers. For winning credits, he looks to energy and other commodity producers and tech companies with growing earnings and cash flows from the licensing of mission-critical software and other technologies to customers. This edition of The Sherman Show was recorded April 5, 2022.

If the broad economy slows as Mr. Cohen anticipates, he says top- and bottom-line growth will differentiate between performing and deteriorating credits (11:00) as that will be needed to keep pace with rising operational and financing costs. On the positive side (16:00), many corporations will not face the need to pay off or rollover debt principal for some time to come. “Every company that could refinance has,” Mr. Cohen says. “So, we’re probably looking at around five years or so, to generalize across the markets, before you get a really big step-up in maturities.” In terms of sector allocations within corporate credit (20:50), he gives his reasons for “migrating from the greatest risk-on inflationary trade to something more moderate,” with greater weightings toward investment grade versus high yield and toward defensive versus cyclicals.  Mr. Cohen also shares his views on the relationship between corporate earnings and credit markets (25:49) and the signals he uses to spot changes in the condition of corporate credit and default risk.

About the Hosts

About the Hosts

  • Jeffrey Sherman, CFA

    Jeffrey Sherman, CFA

    As DoubleLine’s Deputy Chief Investment Officer, Jeffrey Sherman oversees and administers DoubleLine’s Investment Management sub-committee coordinating and implementing policies and processes across the investment teams. He also serves as lead portfolio manager for multi-sector and derivative-based strategies. Mr. Sherman is a member of DoubleLine’s Executive Management and Fixed Income Asset Allocation Committees. He can be heard regularly on his podcast “The Sherman Show” (Twitter @ShermanShowPod, where he interviews distinguished guests, giving listeners insight into DoubleLine’s current views. In 2018, Money Management Executive named Jeffrey Sherman as one of “10 Fund Managers to Watch” in its yearly special report. Prior to joining DoubleLine in 2009, Mr. Sherman was a Senior Vice President at TCW where he worked as a portfolio manager and quantitative analyst focused on fixed income and real-asset portfolios. He was a statistics and mathematics instructor at both the University of the Pacific and Florida State University. Mr. Sherman taught Quantitative Methods for Level I candidates in the CFA LA/USC Review Program for many years. He holds a B.S. in Applied Mathematics from the University of the Pacific and an M.S. in Financial Engineering from the Claremont Graduate University. Mr. Sherman is a CFA® charterholder.

  • Samuel Lau

    Macro-Asset Allocation

    Samuel Lau

    Macro-Asset Allocation

    Mr. Lau joined DoubleLine in 2009. He is a Strategist on the Fixed Income Asset Allocation (FIAA) Committee and a contributing member on the Global Asset Allocation and Macro committees. Mr. Lau is a Portfolio Manager on DoubleLine’s strategic commodity strategy while working in portfolio management and trading for derivatives-based and multi-asset strategies, including DoubleLine's Shiller Enhanced CAPE®, Shiller Enhanced International CAPE®, Real Estate and Income, and Multi-Asset Trend strategies. He also co-hosts the Sherman Show (Twitter @ShermanShowPod, and Monday Morning Minutes (Twitter @DLineMinutes, podcasts. Prior to DoubleLine, Mr. Lau was a Vice President at TCW where he worked under Jeffrey Gundlach as a Research Analyst in the Mortgage Group. He holds a B.S. from the University of Wisconsin, Madison and an MBA from the Marshall School of Business at the University of Southern California.