Calvert High Yield Bond Fund Seeks to Add Value Through ESG Analysis
Certain industries and certain parts of the credit quality curve may be particularly influenced by very strong or very poor ESG profiles
Contact: Melinda Lovins
February 27, 2014// Bethesda, MD/// Yield-hungry investors may benefit from considering fixed income funds that embrace ESG (Environmental, Social and Governance) factors in their investment approach. Once mainly the domain of equity strategies, ESG-oriented fixed income funds like the Calvert High Yield Bond Fund (CYBAX) may benefit investors seeking attractive income and risk-adjusted returns. The fund’s investment process is enhanced by integrated investment research, which seeks to add value by complementing traditional fundamental security analysis with ESG analysis. This integrated approach helps identify attractive opportunities while mitigating risk.
“In this current low rate environment, high yield bonds offer yield-starved investors an attractive way to generate monthly income,” noted Matt Duch, lead portfolio manager of the Calvert High Yield Bond Fund. “This asset class offers portfolio diversification benefits and, according to Morningstar’s fixed income categories, typically provides the highest yields.”
“As part of the risk and opportunity assessment process, Calvert Investment Management, Inc. incorporates ESG criterion across sectors and holdings,” said Cathy Roy, CFA, and Chief Investment Officer for fixed income at Calvert. “We believe that assessing ESG factors in our credit analysis at the industry and/or security level adds value by highlighting non-traditional fundamental investment risks and performance opportunities that may be missed by those ignoring ESG factors."
Portfolio manager Vishal Khanduja, CFA explained that Calvert seeks to invest in companies that have strong cash flows, sound balance sheets and a history of paying down debt. He said that companies that are ESG leaders often have more attractive cost structures, and noted that strong ESG practices tend to drive EBITDA margins which influence credit spreads.
“Our ESG analysis digs deep,” says Khanduja. “Our team assesses the implications of each ESG metric that it has identified as being relevant to the analysis of a company and, in turn, how that metric affects the bottom line and the company’s ability to service its debt.”
Calvert’s sector and security selection process involves a relative value assessment of both fundamental and ESG (environmental, social, and governance) risks. Our credit team collaborates with in-house sustainability research analysts, to find opportunities in industries and companies that exhibit a combination of particularly strong fundamentals and favorable ESG factors as well as to avoid exposure in areas of the credit market where the reverse may apply. We believe that certain industries and certain parts of the credit quality curve are particularly influenced by very strong or very poor ESG profiles, and express these views in the sector and security selection process.
Learn more about the value of ESG Investing by reading Calvert’s eBook: Creating Shareholder Value with ESG Integration
Period Ending 12/31/13:
|Calvert High Yield Bond Fund||YTD||1YR||3YR||5YR||10 YR|| Since Inception |
| A Shares with |
(3.75% Sales Charge)
|A Shares at Net Asset Value (NAV)||8.23%||7.63%||8.75%||3.57%||14.39%||7.08%|
|BofA Merrill Lynch U.S. High Yield Master II Index||7.43%||6.74%||8.54%||2.40%||17.52%||8.75%|
The performance data quoted represents past performance, which does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. Visit www.calvert.com to obtain performance data current to the most recent month-end.
High-yield, high risk bonds, which are rated below investment grade, can involve a substantial risk of loss because they have a greater risk of issuer default and are subject to greater price volatility than investment-grade bonds.
Bond funds are subject to interest rate risk and credit risk. When interest rates rise, the value of fixed-income securities will generally fall. In addition, the credit quality of fixed-income securities may deteriorate, which could lead to default or bankruptcy of the issuer where the issuer becomes unable to pay its obligations when due.
The Fund may invest more of its assets in a smaller number of issuers than a diversified fund, and gains or losses on a single investment may have greater impact on the Fund.
Learn more about the Calvert High Yield Bond Fund and read the most recent Fund commentary.
Calvert Investments is an investment management company that offers mutual funds and separate accounts to institutional investors, retirement plans, financial intermediaries, and their clients. By combining rigorous analysis with independent thinking, our disciplined approach to money management goes beyond traditional factors in order to manage risk and to identify investment opportunities with greater long-term potential. We offer more than 40 equity, bond, and asset allocation investment strategies, many of which feature integrated corporate sustainability and responsibility research. Founded in 1976 and based in Bethesda, Maryland, Calvert Investments managed assets of more than $13 billion as of February 26, 2014. More information is available at www.Calvert.com.
For more information on any Calvert mutual fund, please call Calvert at 800.818.8397 for a free prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest or send money.
Calvert mutual funds are underwritten and distributed by Calvert Investment Distributors, Inc., member FINRA and subsidiary of Calvert Investments, Inc.