Looking under the Hood of Active Credit Managers

Palhares, D and Richardson, S A (2020) Looking under the Hood of Active Credit Managers. Financial Analysts Journal, 76 (2). pp. 82-102. ISSN 0015-198X

Abstract

Extensive research has explored the style exposures of actively managed equity funds. We conducted an exhaustive set of return-based and holdings-based analyses to understand actively managed credit funds. We found that credit long–short managers tend to have high passive exposure to the credit risk premium. In contrast, we found that long-only managers that focus on high-yield credits provide less exposure to the credit risk premium than do their respective benchmarks. For both credit hedge funds and long-only credit mutual funds, we found that neither has economically meaningful exposures to well-compensated systematic factors.