Description:
Aviva’s private fixed income investment strategy focuses on long-term fundamental credit analysis, highly selective and value-oriented asset selection, and the creation of a well diversified portfolio. Private placements are privately placed fixed income securities, typically issued as bonds, which are exempt from SEC registration. Private placements may be issued by both publicly traded and privately held companies domiciled in the U.S. or other countries. Companies typically issue private placement debt to obtain terms and structures not typically available in the public bond market. The overall size of the private fixed income market is approximately $1 trillion. The issue size ranges from $20 million to over $1 billion, with a typical issue size of between $100 million to $200 million.
Long-term institutional investors view private fixed income as attractive for several reasons. Privately placed debt generally pays yields in excess of comparable public bonds of the same maturity and credit quality. This excess yield is typically in the range of 15 to 35 basis points. Private placements also contain protective financial covenants and/or collateral. These covenants typically provide greater credit protection which generally results in lower credit losses and higher average default recovery rates than public bonds. Furthermore, private placements offer increased diversification opportunities by gaining access to issuers and structures not available in the public bond market.
Each portfolio is constructed and managed through the firm’s established team management process, with the goal of designing a portfolio that meets the client’s objectives. The private placement team utilizes a bottom-up approach, with a focus on long-term credit fundamentals, deal structure, and relative value. Aviva Investors actively monitors private placement holdings utilizing internal credit models, interaction with company management, financial forecasts, and covenant compliance analysis.