Global Sustainable High Yield Bond Strategy

Our Ireland domiciled Nomura Funds Ireland – Global Sustainable High Yield Bond Fund maintains dual investment objectives – it seeks to both capture the global high yield bond market’s attractive total returns while minimizing losses, and contribute to positive sustainability outcomes. We invest primarily in fixed income securities of US and European corporate issuers which are rated in the lower rating categories of the established rating services or are unrated securities of comparable quality. The strategy follows a consistent global approach that allows the exploitation of different spreads of a company in different currencies. To meet the sustainability objective, the strategy invests in issuers that support key environmental or social objectives, do no significant harm on sustainability matters, and practice good governance.

NCRAM: Our Specialist Credit Research Investment Boutique

The Nomura Global Sustainable High Yield Bond strategy is managed by Nomura Corporate Research and Asset Management Inc. (“NCRAM”), a Nomura Asset Management affiliate. NCRAM was established in 1991 and is an analyst-driven investment boutique that specialises in below investment-grade credit.

The “Strong Horse” Philosophy

NCRAM believes a total return approach driven by credit research is the best way to generate alpha in high yield. We describe our investment philosophy as the “Strong Horse” philosophy. Strong Horse companies can carry their debt load through good times and bad. These companies generally have a positive ability to de-lever their balance sheet by generating strong, positive cash flows through sustainable business practices. The creditworthiness of these companies tends to increase over time, as will their credit ratings.

Our Investment Approach

• Bottom up, fundamentally driven, credit intensive research analysis focused on sustainable investments.
• Attempt to avoid credit losses.
• Seek opportunistic credit quality positioning during the various phases of the credit and economic cycles.
• Diversified portfolio of issuers.
• Disciplined risk management through sector/industry limits and individual holdings limits.

A combination of top-down and bottom-up analysis is used to identify higher quality names with strong and improving credit fundamentals.

• Target allocation of roughly 75% US High Yield and 25% Euro High Yield.
• Ability to make tactical shifts to anticipate key opportunities or risks across the developed market regions.
• Credit picking within each region is based on a proven investment process. Sustainability analysis is a critical component of credit selection.
• Nomura has a large team of global high yield investment professionals. Analysts are industry experts and actively involved in the investment decision making process.

Our Investment Process

NCRAM’s Global Sustainable High Yield strategy first makes an allocation to regional sleeves including US and European high yield. For security selection, we follow an institutionalized investment decision making process:

1. Idea Generation: Surface ideas in a collaborative environment.
2. Credit Research: Thorough research executed by experienced analysts.
3. Portfolio Construction: Disciplined portfolio construction.

Idea generation can come from analysts, Portfolio Managers, or the CIO. We seek to identify investment opportunities or situations where bond prices differ from fundamental risks. Portfolio Managers and analysts exchange ideas regarding market or issuer developments and this information is shared among members of the investment team.

NCRAM’s credit research process is underpinned by diligent fundamental analysis. NCRAM’s process seeks to analyze business risk, financial risk, sustainability risk, and the structure of a bond issue. Analysts are also responsible for identifying higher ESG risk issuers to be eliminated from the investment universe, and determining if an issuer contributes to impactful environmental or social objectives, does no significant harm regarding sustainability matters, and practices good governance. Both credit analysts and the Portfolio Manager are involved in buy and sell decisions. After thorough research, analysts will recommend credits for the portfolio construction process. These recommendations are discussed in meetings with the Portfolio Managers and we seek to build consensus before a position will be included in any portfolio.

We seek to create a portfolio with the optimal combination of risk and reward while targeting positive sustainability outcomes, and our process of security valuation assesses the potential returns vs. investment risks.

Our approach is primarily bottom-up, though top-down perspectives are incorporated. We also characterize our process as a fundamental, as opposed to quantitative, approach.

For further information please visit NCRAM’s website. http://www.nomura.com/ncram/ (Please note that the link will access a website for contents of which we take no responsibility and to which our data protection rules do not apply.)  

Awards and Ratings

Potential Significant Risks

High Yield bonds are exposed to price risk due to changes in the credit spread caused either by improving or worsening credit quality or due to changes in the market sentiment. Moreover, the bonds are exposed to non-negligible credit default risk. The exposure to the traditional duration risk, i.e. to changes in the underlying government bond yield curve, is in contrast much smaller and usually negatively correlated with the credit risks. Due to its global investment approach part of the portfolio is exposed to currency risk versus the base currency of the fund.

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Fund	Monthly Factsheet
Class I USD

For a full list of available share class documents including PRIIPs KIDs, please visit our fund documents page.

The lead share class fund literature is shown first in the above list. If any literature is not available in the above list for the share class you are invested in/interested in, please contact [email protected]

Fund Snapshot: This document was prepared by Nomura Asset Management Europe KVG mbH, from sources it reasonably believes to be accurate.

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