Soon after appointing Kostas Theodoropoulos as portfolio manager, Norwegian asset manager Agmentum Capital is expanding beyond shipping equities into credit markets with the launch of a shipping-focused high-yield bond fund. Agmentum High Yield Bond Fund will invest primarily in shipping, offshore and energy companies, sectors where the team has developed investment experience. The launch builds on the firm’s existing maritime equity strategy while seeking to capitalize on what it sees as an attractive risk-reward opportunity in Nordic high-yield credit.
“Agmentum High Yield Bond Fund focuses on sectors and companies where the fund management team has extensive experience, namely shipping, offshore and energy,” confirms Theodoropoulos. “It provides diversified fixed-income exposure to issuer sectors that are largely uncorrelated with mainstream industries. Most of the bonds also have shorter maturities, reducing duration and interest rate exposure.” Rather than targeting a specific portfolio duration, the fund intends to invest in bonds that can be held to maturity, with a maximum time to maturity of five years.
“Agmentum High Yield Bond Fund focuses on sectors and companies where the fund management team has extensive experience, namely shipping, offshore and energy.”
Kostas Theodoropoulos
The approach places emphasis on credit selection and capturing contractual yields while managing exposure to changes in interest rates. “High-yield bond portfolio management is about diversification, careful bottom-up credit selection, macroeconomic analysis of the invested sectors and portfolio risk management, particularly when it comes to interest rate exposure,” Theodoropoulos explains. “The objective is to generate the expected yield while minimizing credit and interest rate risks.”
Shipping Companies Offer a Credit Opportunity
The investment case is partly based on the changing financial position of companies across shipping and related industries. According to Theodoropoulos, many shipping companies have strengthened their balance sheets to levels approaching investment-grade metrics, even though the volatility of their cash flows means their debt continues to be classified as high yield. “Currently, many shipping companies enjoy almost investment-grade balance sheet metrics, while their cash-flow volatility remains high yield. This provides them with room to grow, reward shareholders and optimize their balance sheets,” he says.
“Currently, many shipping companies enjoy almost investment-grade balance sheet metrics, while their cash-flow volatility remains high yield. This provides them with room to grow, reward shareholders and optimize their balance sheets.”
Kostas Theodoropoulos
Theodoropoulos also points to an ageing asset base across shipping and adjacent industries as a source of financing demand. Established companies need capital to renew and expand their fleets and other assets, creating opportunities for bond investors to finance businesses with established market positions and, in some cases, contracted revenues. “Given the ageing asset base in many shipping and adjacent industries, as well as the substantially improved credit metrics across many companies, we believe that a well-diversified, bottom-up-selected bond portfolio can offer an attractive risk-reward proposition for investors who understand the investment thesis behind these bond markets,” he argues.
The launch builds on Agmentum Capital’s existing investment activities. The firm has managed a maritime shipping long/short equity fund for more than four years, led by Head of Fund Management and Portfolio Manager Carl Synvis, and is now expanding its offering into credit markets. The team’s experience on the equity side is complemented by Theodoropoulos’ background in fixed income. Having managed bond portfolios through different interest rate and credit spread environments, across issuers of varying credit quality, he brings additional experience to the new strategy. “The combination of extensive experience and a holistic approach provides the framework for managing and maintaining the high-yield portfolio, with the aim of offering investors a favourable risk-reward combination,” says Theodoropoulos.
Accessing the Nordic High-Yield Market
Agmentum High Yield Bond Fund also aims to give investors access to a specialized segment of the Nordic high-yield market. “The Nordic high-yield market has historically been regarded as a niche part of the global high-yield bond market, providing companies with access to a flexible source of funding and investors with stable and measurable yield premiums over similar exposures,” argues Theodoropoulos.
Several factors contribute to these premiums, according to Theodoropoulos. These include the specialized industries represented in the market, such as shipping and related sectors, the relatively small size of many issuers, the absence of credit ratings for numerous bonds and the limited size of individual issues. Together, these characteristics can create opportunities for investors with the resources and expertise to analyze the underlying companies.
“Investors outside the Nordics, particularly across Europe, do not have easy access to the investment universe and specific industries that Nordic markets offer.”
Kostas Theodoropoulos
For international investors, however, accessing this universe and conducting the necessary issuer-level analysis can remain challenging. “Investors outside the Nordics, particularly across Europe, do not have easy access to the investment universe and specific industries that Nordic markets offer,” concludes Theodoropoulos. “A diversified and specialized bond fund can therefore be an appealing risk-reward vehicle for those looking to enter the market.”
