Take a conservative approach to leverage

We take a conservative approach to leverage that fits with our strategy to deliver a product characterised by lower levels of risk.  

Over time we’ve seen good companies with high levels of leverage become bad deals. These scenarios have usually involved a company with a high level of cash flow predictability, making a high level of leverage possible. However, a highly leveraged company is more sensitive to internal and external market hiccups that could disrupt the balance sheet.

As a long-term investor investing through open-ended funds, we aim for capital structures that are resilient to market cycles. Our conservative approach to leverage means we focus on our portfolio companies issuing long-dated, fixed-rate debt while maintaining investment grade credit ratings. This approach, in addition to helping to lower risk, has helped to manage the cost of capital and mitigate the impact of rising interest rates. 

Further, a portfolio company’s investment grade credit profile can help to ensure continued access to capital even in the face of market volatility, such as that experienced during the global financial crisis in 2007 – 2009 and more recently during the COVID 19 pandemic, when markets were significantly disrupted and stressed.