Capital Allocators – Inside the Institutional Investment Industry David Breazzano - High Yields and Low Risk at Polen Capital (EP.405)
Sep 12, 2024
Dave Breazzano, Head of the Credit Team at Polen Capital, brings over 40 years of experience in high-yield investing. He shares the fascinating evolution of the high-yield market since the 1980s. Dave demystifies common myths about high-yield bonds, revealing lower default rates and valuable strategies for resilient investments. He discusses the impact of rising interest rates on private credit and the importance of adaptability in changing markets. Personal experiences in history and travel also shape his unique perspective on risk in finance.
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Early High-Yield Career
- Dave Breazzano started in high yield in the early 1980s at First Investors, managing over a billion dollars in a nascent market.
- He later helped establish high-yield mutual funds at T. Rowe Price and Fidelity, experiencing significant growth and market transformations.
High-Yield Myths
- The high-yield market is often misunderstood, with myths about high default rates and zero recovery.
- In reality, default rates are much lower, and recovery rates average around 40%, making high-yield a good risk-return investment.
Portfolio Construction
- Construct high-yield portfolios with the highest possible yield without excessive risk.
- Contain negative credit events and capture the yield spread for significant compounding returns.