Peritus HYLD ETF-BUY. HYLDETF HYLD is actively managed value oriented high yield ETF-avoids LBO...
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Transcript of Peritus HYLD ETF-BUY. HYLDETF HYLD is actively managed value oriented high yield ETF-avoids LBO...
Peritus HYLD ETF-BUY
HYLD ETF
• HYLD is actively managed value oriented high yield ETF-avoids LBO originated debt• Employs risk management strategy• Less focus on credit ratings-either AAA or D• Disciplined investment process-does business
provide a service, generate free cash flow, etc.• Managed by Tim Gramatovich CFA and Ron
Heller
• Income-buys on secondary market at discount to par providing potential capital appreciation• Coupon-investing in non-investment grade has
higher coupon cash flow yield• Issuers-more focused and concentrated than
industry norm• Duration/Maturity Profile-low duration (3.2
years vs. 4.07 index)
HYLD attributes
• HYLD• NYSE Arca• Inception Date 11/30/2010• CUSIP 00768Y503• Current price $51.25• AUM $210,072,166.70• Premium/Discount .02• Net Expense Ratio 1.35%
FUND BASICS
• YTD ETF price
• Blackrock Liquidity Temp Fund 3.16%• Accrued Income 2.72%• Rotech Healthcare $100.50, 10.75 2.34%• Dyncorp Int’l $99.75, 10.375 2.28%• Air Canada $109.88 12.00 2.26%• Exide Technologies $86.38 8.625 2.25%• Arch Coal $103 9.875 2.24%• Kinetic Concepts $99.88 12.5 2.22%• Affinion Group $79.25 7.875 2.04%• Energy Solutions $105.25 10.75 2.03%
TOP 10 HOLDINGS as of 3/27/13
• Possible Bond Bubble?• Bond Outflow, Equity Inflow?• High Yield Market still 700bp spread• Steady demand for new issuance• Leveraged loan market overheated-no
covenants, low coupon, etc.
Fixed Income Trends
HYLD vs Ten Year Treasury
Strengths
Low Yield EnvironmentStrong Corporate Balance SheetsLower Default RatesShort DurationGreater Liquidity
Weaknesses
Later in cycle (less potential for returns in mid teens)Management Fee
OpportunitiesHeavy Demand for Issuance$3 trillion in pent up PE demand
ThreatsDisorderly rate increase Recession produces defaults
SWOT Analysis
• Current low yield environment demands allocation to high yield debt. Active/value style unlocks value in the $1.4 trillion high yield market.• Buy 200 shares at marketprice.
Investment Thesis