Matthew Lamb, CEO of Pacific Asset Management was joined by Chris Joye and Fionn O’Leary, Senior Portfolio Managers at Coolabah Capital Investments and co-managers of the Pacific Coolabah Global Active Credit Fund. The team shared their insights into navigating the complexities of the investment-grade global credit market, detailing how they exploit inefficiencies, adapt to macroeconomic shifts, and implement strategies that generate meaningful alpha for clients.
Video 1: Unlocking Value
Exploiting Inefficiencies in the Global Credit Market
At $20 trillion in size, the global credit market remains one of the most inefficient asset classes. Limited algorithmic trading and opaque pricing create unique opportunities for active managers. Chris Joye highlights the importance of precision in pricing and the benefits of targeting, high-quality liquid securities.
“Unlike equities, where trading is highly transparent, credit markets operate in opacity,” Chris explains. “This allows active managers like us to uncover mispricings and generate meaningful alpha for our clients.”
Video 2: A Year in Review
Performance and Strategy
Reflecting on the first year of the Pacific Coolabah Global Active Credit Fund, the team highlighted its success in delivering 13.7% returns after fees, outperforming its benchmark by 200 basis points.
Chris commented, “We’re running very, very liquid portfolios that are incredibly active and have extremely high credit quality—much higher than the benchmark typically.”
Fionn added, “This performance reflects our disciplined approach, combining global diversification, quantitative tools, and highly active trading.”
Video 3: Zero Duration Credit Variant
A Floating Rate Strategy with no interest rate risk
A Floating Rate Strategy with no interest rate risk
To meet the growing demand for floating rate strategies, Coolabah and Pacific have begun work on a Zero Duration Credit variant of the strategy, this is designed to eliminate the interest rate exposure component while maintaining attractive returns above cash rates.
“This strategy suits investors seeking stability in volatile markets,” Chris noted. “It’s essentially a floating rate version of our existing fund, tailored for those looking to enhance cash-like returns without interest rate exposure.”
Video 4: Credit Market Overview Part 1
US Election Reaction: The Fed’s High Rates, Inflation, and Asset Pricing
US Election Reaction: The Fed’s High Rates, Inflation, and Asset Pricing
The team also discussed the broader economic environment, including the implications of high interest rates, inflationary pressures, and geopolitical uncertainty.
“Higher rates are reshaping the credit landscape,” said Chris. “We’re seeing increased default risks, particularly among speculative-grade borrowers, and rising volatility. These conditions, however, create opportunities for active managers to thrive.”
Video 5: Credit Market Overview Part 2
Navigating Credit Risks in a Changing Market
As the global economy contends with a “higher-for-longer” rate environment, issuers face significant refinancing challenges. Chris Joye highlighted the looming risks:
“There’s a massive wall of high-yield maturities ahead,” Chris stated. “Many issuers have deferred refinancing, hoping for rate cuts that haven’t materialised. This creates enormous pressure, particularly for cyclically sensitive sectors.”
Looking to the future, Chris remained optimistic about the role of active management in navigating this uncertainty:
“In turbulent markets, active strategies shine. By staying focused on quality and liquidity, we’re well-positioned to deliver consistent alpha, even in challenging conditions.”
