In a buoyant market for private debt, Hermes Investment Management will be discussing how investors should think about allocating to direct lending strategies to deliver optimal risk adjusted returns in the current environment.

With European corporate default rates at (or close to) all-time lows and the ECB expected to embark on another round of QE, this presentation will:

• Examine current market dynamics in the sub-investment grade space and the inter-play of technicals and fundamentals 
• Assess the importance of credit selection across market cycles and in different economic conditions
• Compare relative value opportunities across high yield bonds and leveraged loans
• Explore how flexible mandates can capture superior risk-adjusted returns in a portfolio
• Evaluate the resources required to build and manage high yield bond and leveraged loan portfolio

Systematic factor investing has become extremely popular across a wide range of asset classes but has always suffered from complex challenges when applied to corporate bonds. However recent improvements in data reliability and increased electronic trading in fixed income markets have paved the way for systematic strategies. At Fidelity, we have designed a ground-breaking, bottom-up approach using an extensive dataset to create systematic portfolios that we show generate consistent, positive alpha through the credit cycle.