Silverdale Bond Fund
Silverdale Bond Fund is a diversified portfolio of primarily investment grade short duration US dollar bonds, actively managed for enhance returns, using ring-fenced leverage.
To generate enhanced investor returns by clever use of asset-level leverage, while actively managing the portfolio duration.
- Quality assets: Investment grade US$ bonds (min 75%).
- Short duration (2-3 years).
- Low volatility.
- Excellent returns of 8% – 10% p.a.
- No forex risk (US dollars only).
- Enhanced returns, non-recourse leverage.
- Quarterly dividend distribution, predetermined cash flow.
- Well diversified portfolio of over 100 bonds.
- Liquid open-ended fund with weekly subscription/redemption.
- State-of-the-art, risk management systems, using proprietary cash flow modelling.
- As interest rates go up, performance is likely to improve due to short reinvestment period.
- Strong track record of over 7 years.
Emerging Market vs Developed Market
EMs hold almost twice the amount of forex reserves as compared to DM.
EMs corporate have less debt as compared to DM corporate
Yet: EM bonds offer yield pickup of ~80 bps over DM bonds for same credit rating!
Investment Grade vs High Yield
According to Standard & Poor’s, the default rate of 3 years investment grade credit 0.46% as compared to non-investment grade default rate of 10.63%.
Leveraged IG gives returns similar to that of HY without adding credit risk.
Short Duration vs Long Duration
True, there would be short term adjustment pain, but that can be taken care of by portfolio laddering with short weighted average duration. In an increasing interest rate environment, the coupons and sale proceeds get re-invested at increasingly higher yields!
Fungible Cash Flow Modeling
The key risk of investing in fixed income securities is the redemption risk
Silverdale’s core competency is its proprietary Cash Flow Modelling based on fungible cash (SCFM), which provides us insight into the bond issuer’s Ability to Pay and Willingness to Pay. SCFM is the core of our investment process:
Beyond credit filters such as credit rating of bonds, duration, YTM, etc., we deploy SCFM based on Legal Review of bond covenants, and proprietary Silverdale Risk Management Protocol (SRMP) to select bonds with superior risk-adjusted returns.
Duration Management, Diversification & Optimization Built on robust Risk Management System