e-fundresearch: Mr Rudolph-Shabinsky. You are the fund manager of the ACMBernstein-Short Duration HY Pf A2 USD (ISIN: LU0654559516). Since when are your responsible for the fund management?
Rudolph-Shabinsky: I’ve been involved with fund management for 20 years. The Short Duration High Yield Fund was only introduced in July 2011. However, I have been working on this specific strategy, and high yield investing in general, for much longer.
e-fundresearch: Which benchmark do you adhere to?
Rudolph-Shabinsky: The Fund is benchmarked against the Barclays Capital Global High Yield Corporate 1-5 year BB/B Index. Our real goal, however, is to generate a return similar to the broader high yield market over time, but with significantly less volatility- particularly in down markets.
e-fundresearch: Are you also responsible for other funds at the moment?
Rudolph-Shabinsky: As a Senior Vice President and Portfolio Manager on ACMBernstein’s Credit Portfolio Management Team, I am involved in most of our credit-related fixed income funds and strategies. My current active fund management focus is on our Short Duration High Yield Fund, however.
e-fundresearch: What is the total volume that you manage in all your funds?
Rudolph-Shabinsky: Globally, ACMBernstein manages $218 billion in fixed income. (31.1.2012). We have been managing High Yield Strategies since 1986, more than 25 years. Today, we manage almost $20 billion in high yield assets in both regional and global high yield strategies, including short duration strategies, for a diversified group of retail and institutional investors globally. The Short Duration High Yield Fund is still small, but we have received tremendous interest in the product, given how well it meets the natural demand in today’s environment for lower volatility, higher-yielding fixed income solutions.
e-fundresearch: Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2007-2011? Absolutely and relatively to the relevant benchmark? How content are you with your own performance in the last years and this year?
Rudolph-Shabinsky: This particular Fund is new, with performance only since mid-2011, but we are pleased with its performance so far. Our research had suggested that applying a short duration higher quality approach to high yield would generate better risk-adjusted returns than the broader high yield market, and so far, that has been the case.
e-fundresearch: How are you able to deliver added value for your investors with your performance?
Rudolph-Shabinsky: There are two aspects to how we add value for our investors.
First, of course, is that we base our investments on proprietary fundamental and quantitative research. We have successfully done this for high yield clients for many years.
Secondly, the particular design of this Fund generates an attractive risk-return profile for investors. We believe that over the long term, taking a conservative approach to high yield investing improves risk-adjusted return potential. So, in this Fund we use three such approaches. First, we emphasize shorter duration bonds. Second, we focus on higher quality issuers within the high yield universe. Third, we use hedging techniques, including the use of CDS and interest-rate futures and options. All three aspects of our approach are designed to lower the volatility of our Fund: we seek to deliver risk-adjusted returns similar to the broader global high yield market while exhibiting lower volatility.
e-fundresearch: How long have you been a fund manager already?
Rudolph-Shabinsky: I have been working in this industry for 24 years and joined ACMBernstein 20 years ago as a fixed income portfolio manager.
e-fundresearch: What were your biggest successes and your biggest disappointments in your career as fund manager?
Rudolph-Shabinsky: Being involved in successfully managing within high yield investment universe through the market turbulence of the recent years is certainly a highlight. I wish we had started a lower volatility high yield fund earlier – it would have been a great investment for our clients over time.
e-fundresearch: What kind of capital market situation do we have at the moment? How do you act in this environment?
Rudolph-Shabinsky: We believe the opportunity in high yield bonds remains attractive, as companies continue to manage their balance sheets relatively conservatively. Default rates remain low. Current yields on high yield bonds are also attractive relative to investment-grade corporate and government bonds – though they are down recently due to positive performance.
The fixed income markets in general remain volatile, and high yield bonds, in particular, have seen significant ups and downs in recent months. Our Market Cycle Indicator, a proprietary quantitative tool we use to identify phases in the credit cycle, suggests that volatility is likely to remain elevated. We think the ACMBernstein Short Duration High Yield Fund may be a good fit for this environment: by shortening bond duration, focusing on higher quality, and implementing hedging techniques, our Fund may give investors a smoother ride during volatile periods while giving up relatively little high yield market return over a full market cycle.
e-fundresearch: What are the special challenges in this environment?
Rudolph-Shabinsky: The liquidity of individual high yield bonds is something fund managers need to pay close attention to. It is very important to have a clear, in-depth understanding of each high yield issuer whose bonds we are holding or considering buying. Knowing these details is not only required for managing idiosyncratic risk, but is also required to construct portfolios most efficiently. Now more than ever, classic fundamental credit research is critically important.
I also believe that the high yield market tends to underappreciate the potential risk of extension. Most high yield bonds are callable, but if market conditions change, many bonds may not be called and will trade to much longer durations. We employ several strategies to mitigate this risk, including creating synthetic high yield exposures through a combination of CDS and government bonds that do not have callability
e-fundresearch: What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?
Rudolph-Shabinsky: Our goals for our Fund are to deliver fully on what we have promised clients: returns similar to the broader global high yield market but with lower volatility. The nature of this Fund’s approach is that it will lag in both bull and bear markets, but over full market cycles, our objective is to capture more of the high yield market’s upside and less of its downside, delivering better risk-adjusted returns to our clients.
e-fundresearch: Do you model yourself on someone? Any ideals?
Rudolph-Shabinsky: I don´t model myself on anyone in particular. We manage with a team approach, and each team member contributes in any way possible. We believe this approach provides clients with our very best thinking.
In my spare time, I am an avid rower and compete in multi-person boats (I´ll be racing in an eight man boat with my teammates from university days at the Heineken Cup in Amsterdam in March), so teamwork is a natural state for me. When everyone works well together, a rowing shell moves quickly with less apparent effort. Portfolio management is like that as well.
e-fundresearch: What motivates you in your job?
Rudolph-Shabinsky: My motivation comes from two primary sources: my wish to deliver results for our clients, and my competitive desire to help our team achieve top results within the risk parameters our clients expect.
e-fundresearch: What else do you want to achieve or do you have any further aims as a fund manager?
Rudolph-Shabinsky: I think there is always more to achieve. The markets are fascinating because they change every day. Strategies that worked at one point may not in the future. Trying to anticipate and react to the changing world is a great challenge and thus very interesting. I’d like to see ACMBernstein become known as the pre-eminent credit manager in the world – and I’d like to make sure I do my part in making that happen.
e-fundresearch: What other profession would you have taken interest in, apart from becoming a fund manager?
Rudolph-Shabinsky: One day I think I’ll become a rowing coach. I’ve actively participated in the sport for many years, since my university days at Cornell University. I find that the sport teaches many young (and older) people important lessons about life – namely that teamwork, dedication and persistence are all necessary for success.
e-fundresearch: Thank you for the interview!