Philosophy
Summit Investment Partners’ is a performance driven investment management organization. Our philosophy is that excess returns are generated by combining the right people, processes and systems. These are the three fundamental ingredients for investment success.
People
Summit’s high yield success begins with its people. People analyze companies and securities. People make purchase and sale decisions. People construct portfolios and employ proper risk management techniques. In order to be successful, one must have the right people. Summit has assembled a high yield group of seasoned investment professionals who possess over 45 years of combined investment experience and many professional designations. Individuals in the high yield group use their analytical, portfolio management and risk management skills to benefit their clients.
Process
Summit believes that a sound, repeatable process is essential to successful investment management over the long term. Summit’s process is based in fundamental credit analysis and employs a relative value approach to individual security selection. Furthermore, Summit uses both a top-down and bottom-up approach in portfolio construction, while using proper diversification as a primary tool for risk management. Active management is essential to the high yield management process, as the volatility in the high yield marketplace is significantly greater than in higher quality fixed income investing.
Systems
Summit believes that it is critical to have proper systems in place to maximize the talents of the people and processes that are in place. Summit utilizes systems that allow for electronic access to research, analytics and trading. In addition, portfolio management, performance attribution and client reporting systems are essential. Lastly, credit, risk monitoring and front-end compliance systems aid analysts and portfolio managers in portfolio construction and maintenance.
The combination of people, process and systems are the fundamental ingredients for successful investment management.
Strategy
Summit believes that the investment process begins by identifying each client’s return objectives and risk tolerance. Once established, Summit employs its investment process in an attempt to meet client objectives.
Summit’s high yield investment process is based in fundamental analysis. The high yield team is focused on identifying companies that have positive free cash flow, an improving business profile, improving debt and interest coverage ratios, and strong asset coverage. A company with one or more of the above characteristics often times is an upgrade candidate, a debt reduction story, or an asset coverage play. In addition, Summit looks for investments in special situations. A company in a special situation may be distressed, or have a specific issue that differentiates it from the rest of the high yield universe. Special situations tend not to correlate with the high yield market as a whole add a measure of diversification to the portfolio.
Summit employs a relative value approach to individual security selection in the high yield marketplace. This is an active management approach that attempts to identify and capitalize on opportunities that develop in the marketplace. Summit’s analysts and portfolio managers monitor the performance of high yield securities to determine if the risk/reward of a given security is increasing or decreasing in comparison to other high yield securities. The portfolio manager strives to have the best risk/return securities in a portfolio, while maintaining proper portfolio characteristics, diversification and risk management.
Summit constructs a portfolio to meet the needs and objectives of its clients. Considerations include quality objectives, yield and total return targets. Summit employs top-down analysis to identify attractive sectors and industries. Summit also employs bottom-up analysis to identify those specific securities that will perform best in the marketplace. Finally, Summit uses proper diversification as its primary tool for risk management.
Summit believes strongly in its process of fundamental credit analysis, combined with a relative value approach to security selection, to construct a portfolio that is well diversified to reduce risk.
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