About Client
A mid-sized buy-side firm reached out to ValueAdd for credit research support. The firm offers institutional investment management services and looks for opportunities across all sectors, cap sizes and asset classes. The firm also offers services such as portfolio management, customized investment strategies, retirement planning, IRA’s and 401k’s, Life insurance reviews and Employer Pension and Stock Option Analysis.
In addition to their own fixed income fund, they also were looking to launch a research platform for the investors, RIAs and other potential customers, interested in investment research on a subscription basis.
Investment process takes a 360-degree view of the entire capital structure to create the ideal investment exposure. The firm has strong expertise and proven track record in combining fundamental research with technical and quantitative analysis to identify assets poised for long-term wealth creation irrespective of market conditions and follows a highly selective approach on the companies they chose to invest in.
Business Problem
The Client wanted a continuous flow of investment ideas across fixed income and equity, across the US, and selected European and emerging market countries.
Through this origination of research, they wanted to build a rich database of fund-manager-curated research ideas on a web-based platform for potential subscribers. Also, selectively investment in researched opportunities that matches their fund policies.
The Client team had only ~2-3 fixed income and equity research professionals with ~15-20 years of experience.
The Scope of work
ValueAdd was expected to initiate and publish actionable research on selected credits every month. This required building a credit model along with a ~20-pager detailed initiating coverage note (ICR) with buy/hold/sell recommendation on securities, and outlook on the issuer.
In addition to the ICR, create by-products like a) crisp presentation of same ICRs, b) brief reports for HNI and retail clients, c) a blog article for seeking-alpha or other such blog platforms, and d) content for their corporate videos on YouTube and other platforms..
All these research pieces needed to be uploaded on their research platform for subscriber-only view.
The Solution
- ValueAdd staffed a dedicated team of credit research analysts with relevant strong experience in the high yield (HY) space.
- Shortlisted HY opportunities by regularly running screens with quantitative and qualitative parameters.
- Wrote detailed, insightful, and actionable ICRs as per the agreed SLAs on quality and timelines. The analysis included,
- Sovereign and industry analysis, company’s business model, and management quality,
- Financial analysis, cap structure analysis using waterfall model, covenants and headroom analysis
- Credit events, corporate actions including Insider trading, past M&A or private equity transactions; and peer comparable, bond/loan comparable
- Initiations doubled with the Client’s inhouse and its ValueAdd team delivering ICRS and other outputs 24/5 across US/ LatAm high yield credits and across sectors including Energy, Oil & Gas, Financials to Retail / Consumer.
- Regular and timely research updates were provided through models updates and memos for quarterly earnings releases, credit events/actions, rating changes, and other material daily news releases
- ValueAdd team closely coordinated with the client team to ensure complete transparency and efficiency during the entire research process.
Benefits Delivered
- The fund generated good alpha on the back of strong research ideas recommended by ValueAdd team.
- The maintenance of the entire coverage of credits was done effectively by the ValueAdd team to facilitate swift action by the fund manager.
- The Research Platform had 50+ strong investment ideas across US, Europe and LatAm high yields.
- Client’s bandwidth released for more value-added initiatives such as Investee management meetings, regulatory filings, marketing, and investor and RIA meetings.
For more details, please reach us on +1 646-583-1991 and info@olddata.valueadd-research.com or Click here to leave your coordinates and we shall call you back shortly.
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