high yield teams. “We can tap into thecollective insights from our firm’s equityfranchise,” he added.
The team’s analysts are focused onprotecting capital on the downside andavoiding credit risk. Its members studyleverage ratios, free cash flows as a percentage of total debt, loan-to-value ratiosand the strategic value of companies andthe quality of their management.
This bottom-up approach to the mar-
ket can provide “great risk-adjusted
returns over time” but consists of assets
that are “callable at par, which caps their
appreciation,” Massaro said. Still, the bank loan market can deliver “very attractive
returns if you enter at the right point.”
The fund emphasizes diversification — favoring higher quality issues like B- and
BB-rate. It holds over 200 names, with about 15-20 issues accounting for roughly
30% of the portfolio. Along with adjustable-rate loans, it includes some fixed-rate
bonds like Treasuries and investment-grade corporates. Its Sharpe ratio, 2. 41, is
higher than that of its benchmark index, the S&P/LSTA Performing Loan Index.
The fund’s flexible, risk-reduction approach helped it weather outflows in thebank loan market in 2019 and during the pandemic-fueled March 2020. The U.S.economy should recover, and that means rising rates eventually — which would begood news for the bank loan market, though not for most other fixed-income sectors.
“There will certainly be differentiation in the market. Some sector and names [willbe] very challenged,” Massaro said. Pandemic-impacted sectors like insurance brokerages are under the microscope, along with software firms that have held up wellthanks to their recurring revenue from subscriptions, he adds. — Bernice Napach
Fixed Income & Overall Asset
Manager of the Year
T. Rowe Price Investment Management
Floating Rate Fund/Bank Loan Strategy
“We have one research
team for high yield and
loans,” Massaro said.
“Collaboration is a bigtheme,” and it goes evenbeyond the bank loan andhigh yield teams. “Wecan tap into the collectiveinsights from our firm’sequity franchise.”
Title: Head of Global High Yield,Portfolio Manager
Years with present firm: 17 years
Years in financial services: 19 years
Investment/Asset class focus:
Floating rate bank loans
Asset Management firm:
T. Rowe Price
Firm’s headquarters: Baltimore, with
Number of employees and/or
offices in 16 countries and 22 cities
Year firm was founded: 1937
partners: 7,471 employees
AUM/advisement as of March 31,
2020: $1 trillion
The T. Rowe Price Bank Loan Strategy is the winner of the AssetManager Award in the fixed-income category thanks to its strong risk-adjustedreturns in a sector that has enduredlarge outflows and declines in creditstandards and recovery rates. The portfolio team’s steller credit selection andfocus on risk reduction underpinnedits performance in 2019 and in the firstquarter of 2020, which is a key reasonthe strategy also was named OverallAsset Manager of the Year.
Often in tough times, the best portfolio managers show their worth, asPaul Massaro, lead portfolio manager ofthe $2 billion T. Rowe Price Bank LoanStrategy and the firm’s InstitutionalFloating Rate Fund, has demonstrated.
Massaro says avoiding credit pitfalls
in individual securities and sectors,
like energy, was an essential factor in
last year’s stellar outperformance. The
healthcare sector was subject to “regu-
latory noise and the opioid crisis,” he
points out, adding that “our analysis
kept us out of those names.”
The fund’s heavy holdings in Asurion,
a cell phone insurance provider, and
Kronos, a workforce management com-
pany, also helped the portfolio’s per-
formance and are further proof of the
fund’s strong team of analysts, according
Fifteen dedicated analysts covering high yield bonds and the bank loanmarket support T. Rowe’s Floating RateFund and its bank loan strategy, alongwith a five-person trading trading team,another portfolio manager and one portfolio specialist. “We have one researchteam for high yield and loans,” Massarosaid. “Collaboration is a big theme,” andit goes even beyond the bank loan and