The BNY Mellon Global Credit Fund celebrates 10 years. Adam Whiteley, head of global credit at Insight Investment1, reflects on the Fund’s success, key active calls, the case for global credit today and future positioning.
The BNY Mellon Global Credit Fund was launched on 29 February 2016 and has since amassed US$3.5bn in assets. Over the past five years, the Fund has an information ratio of 0.78 – a measure that puts it in the 5th percentile of the global credit hedged universe2.
Adam Whiteley, lead portfolio manager, explains what makes the Fund tick...
What do you attribute to the success of the BNY Mellon Global Credit Fund?
We have a stable, long-serving team that has been able to offer a higher consistency of return and less volatility than competitors.
Here are the Fund’s key strengths:
- Consistency of people, process and philosophy.
- A consistently applied process encourages incremental gains.
- Wide specialist expertise across Insight’s entire fixed income team.
- Insight’s landmine checklist supplements human analysis with quantitative signals that highlight early warnings of default risk.
- Our units of risk approach, which gives us a more precise and consistent application for risk-taking.
- Our genuine global presence helps with security selection.
Describe three of the best active calls made on the global credit market over the past 10 years.
1. Cautious late 2019: We did not have a crystal ball in late 2019, but our process flashed a warning sign at high amounts of good news being factored into prices. Our cycle analysis suggested valuations were too high, so we dialled down risk. This protected us from the worst as valuations fell over the next few months.
2. Long on risk April 2020: We recognised the human impact of the Covid pandemic, but we also saw that markets had become too fearful. Credit valuations were not factoring in the support from central banks and governments on its way.
3. Overweight Europe 2022: European credit markets were harder hit than the US in 2022. The sharp rebound in inflation and interest rates hurt more because the outbreak of war in Ukraine sent European energy prices soaring. We looked through these shorter-term issues to go overweight on European credit. That proved to be the right call as valuations normalised over the next two years.
How are you future proofing the fund over the next few years?
We already have a process that brings incremental gains, but that doesn’t mean complacency. As part of a commitment to continuous improvement, we are increasing the use of quantitative analysis. Our investment process will always be a fundamental one, but we believe quant and new technology can increase efficiency and our edge. Examples include:
- Quantitatively screening a universe of tens of thousands of corporate bonds to quickly see relative value.
- Exploiting momentum as a factor in markets.
- Using modern trading protocols that tap into the exchange-traded fund (ETF) eco-system to reduce transaction costs.
Why should an investor consider global credit as an asset class?
Global credit is attractive as a high-quality source of income, particularly at current yields. The benefit of a global approach is both diversification and a bigger opportunity set; more opportunities should bring more chances of success.
Why should an investor favour an active over a passive approach to global credit?
Empirically, the median active fixed income manager outperforms the benchmark 2; by contrast active equity managers are much less successful. This is because there is greater inefficiency in how fixed income securities are priced, so the number of opportunities for active managers to exploit is more.
How has the landscape for global credit investors changed over the last decade?
Two key changes:
1. Yields were very low 10 years ago and that has changed for the better.
2. There is much more automation in the trading of global credit markets now. Where one would have previously interacted over the phone with someone at an investment bank, a lot of trading is now done on electronic platforms. This means faster execution, quicker information flow and an improvement in liquidity. So, the ability to buy and sell at the time you want, at the size that you want, at a price that you want is arguably now better.
What has been the appeal of working for Insight Investment?
I have a team of talented people who know we have a serious job but do it with a smile on their face. Plus, I like the global remit of my role, where there is a bigger range of interesting investment opportunities.
The value of investments can fall. Investors may not get back the amount invested. Income from investments may vary and is not guaranteed.
Investment objective
To achieve a total return from income and capital growth.
Benchmark
The Fund will measure its performance against the Bloomberg Global Aggregate Credit TR Index USD Hedged (the "Benchmark").
The Fund is actively managed, which means the Investment Manager has discretion to invest outside the Benchmark subject to the investment objective and policies disclosed in the Prospectus. However, as the Benchmark covers a significant proportion of the investable universe, the majority of the Fund's holdings will be constituents of the Benchmark and the weightings in the portfolio may be similar to those of the Benchmark. The investment strategy will restrict the extent to which the portfolio holdings may deviate from the Benchmark and consequently the extent to which the Fund can outperform the Benchmark.
Key risks associated with this Fund
· China Interbank Bond Market and Bond Connect Risk: The Fund may invest in China interbank bond market through connection between the related Mainland and Hong Kong financial infrastructure institutions. These may be subject to regulatory changes, settlement risk and quota limitations. An operational constraint such as a suspension in trading could negatively affect the Fund's ability to achieve its investment objective.
· Geographic Concentration Risk: Where the Fund invests significantly in a single market, this may have a material impact on the value of the Fund.
· Objective/Performance Risk: There is no guarantee that the Fund will achieve its objectives.
· Currency Risk: This Fund invests in international markets which means it is exposed to changes in currency rates which could affect the value of the Fund.
· Derivatives Risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the Fund can lose significantly more than the amount it has invested in derivatives.
· Changes in Interest Rates & Inflation Risk: Investments in bonds/money market securities are affected by interest rates and inflation trends which may negatively affect the value of the Fund.
· Credit Ratings and Unrated Securities Risk: Bonds with a low credit rating or unrated bonds have a greater risk of default. These investments may negatively affect the value of the Fund.
· Credit Risk: The issuer of a security held by the Fund may not pay income or repay capital to the Fund when due.
· Emerging Markets Risk: Emerging Markets have additional risks due to less-developed market practices.
· Share Class Hedging Risk: For hedged share classes the hedging strategy is used to reduce the impact of exchange rate movements between the share class currency and the base currency. It may not completely achieve this due to factors such as interest rate differentials.
· Share Class Currency Risk: Where a share class is denominated in a different currency from the base currency of the Fund, changes in the exchange rate between the share class currency and the base currency may affect the value of your investment.
· CoCo's Risk: Contingent Convertible Securities (CoCo's) convert from debt to equity when the issuer's capital drops below a pre-defined level. This may result in the security converting into equities at a discounted share price, the value of the security being written down, temporarily or permanently, and/or coupon payments ceasing or being deferred.
· Counterparty Risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the Fund to financial loss.
· Environmental, Social and Governance (ESG) Investment Approach Risk: The Fund follows an ESG investment approach. This means factors other than financial performance are considered as part of the investment process. This carries the risk that the Fund's performance may be negatively impacted due to restrictions placed on its exposure to certain sectors or types of investments. The approach taken may not reflect the opinions of any particular investor. In addition, in following an ESG investment approach, the Fund is dependent upon information and data from third parties (which may include providers forresearch reports, screenings, ratings and/or analysis such as index providers and consultants). Such information or data may be incomplete, inaccurate or inconsistent.
· Subordinated Debt Risk: Subordinated Debt carries a greater level of risk compared to unsubordinated debt because it receives a lower priority level in terms of its claims on a company's assets in the case of the borrower's default.
A complete description of risk factors is set out in the Prospectus in the section entitled "Risk Factors".
1Investment Managers are appointed by BNY Mellon Investment Management EMEA Limited (BNYMIM EMEA), BNY Mellon Fund Managers Limited (BNYMFM), BNY Mellon Fund Management (Luxembourg) S.A. (BNY MFML) or affiliated fund operating companies to undertake portfolio management activities in relation to contracts for products and services entered into by clients with BNYMIM EMEA, BNY MFML or the BNY Mellon funds.
2MercerInsight, as of 31 December 2025.
3Morningstar's European Active/Passive Barometer – Midyear 2025, 5 August 2025
3165050, Exp: 21 September 2026
