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FICC Focus
Diamond Hill’s Song on Credit Outlook, Landscape: Credit Crunch
Dec 27, 2024
Henry Song, a portfolio manager at Diamond Hill Capital Management specializing in short duration securitized bond strategies, shares insights on the fixed income landscape. He discusses the advantages of shorter-dated bonds amid high interest rates and inflation challenges. The conversation dives into the intricacies of securitized markets versus corporate bonds, highlighting opportunities in asset-backed securities. Additionally, Song touches on the evolving role of technology in trading and the strategic importance of diverse portfolio construction in today's volatile market.
01:01:52
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Quick takeaways
- The short end of the yield curve is preferable for investors due to expected prolonged high interest rates and inflation challenges.
- Diamond Hill's investment strategy emphasizes deep credit analysis, focusing on specific bond selections over macroeconomic predictions for superior returns.
Deep dives
The Investment Philosophy of Diamond Hill
Diamond Hill operates under a clear investment philosophy that emphasizes bottom-up security selection across various asset classes. The firm focuses on deep credit work during underwriting, aiming for 80% or more of their returns to derive from specific bond selections rather than macroeconomic bets. By concentrating on undervalued bonds, they believe that opportunities arise from less frequently issued bonds or those facing temporary headline risks. This approach underscores the belief that 'there are no bad bonds, only bad prices', allowing the firm to seek out profitable investments in overlooked market segments.
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