US high-yield specialist eyes Asia

KDP Asset Management, an American high-yield bond specialist based in Montpellier, Vermont, is making initial marketing and fact-finding investigations into Asia. One of its executives, Michael Penniman, has visited Hong Kong to gauge interest in selling its US dollar-denominated Defensive High Yield portfolios to Asian institutions.

The firm has provided independent high-yield research for over 25 years for a client base largely comprised of US defined benefit pension funds. Its 18 analysts cover over 400 high-yield issues and daily pricing on over 1,300 securities.

More recently it also launched an asset management business led by veteran investors Kathy News, with 25 years of experience, and Peter Merrill, with 19. It is now extending that asset management business overseas.

KDP analysts cover the distressed end of the market, but the asset management group focuses on the low-beta, more defensive side of the high-yield business. This segment delivers steadier, "strong single-digit" returns, according to Penniman.

"KDP seeks to minimize portfolio volatility in part by investing in securities of companies that exhibit greater resilience and staying power in times of financial distress," he says, and the managers focus on large-cap companies with better access to capital when liquidity becomes tight.

Penniman believes the asset class has a lot of promise among prospective Asian clients. "Investment-grade bonds don't have the upside of high yield," he says. "Equities remain volatile; investment grade has had its run; cash and money market funds are difficult. Institutions can go to hedge funds, funds of hedge funds, or they can consider high yield."

Although the initial aim is to sell KDP's US product to Asian investors, Penniman is also researching whether KDP can also add Asian high-yield securities to its research and investment roster.