Why We Upgraded This High-Yield Bond Fund

The durable edge of BrandywineGlobal Corporate Credit’s BCAAX managers earned it People and Process rating upgrades to High from Above Average, which boosted the A shares’ Morningstar Medalist Rating to Gold from Neutral.

Managers Bill Zox and John McClain’s unique approach to high-yield investing rests on more than a decade of collaboration. Their strong partnership began during their time at this fund’s previous parent, Diamond Hill, where they teamed up in 2014. Since joining Brandywine Global, their small team has added depth. Associate portfolio manager Jack Parker joined in 2023, and the team hired an analyst in 2022.

The managers’ attention to valuations sets the fund apart from its high-yield bond Morningstar Category peers. The managers buy bonds when their market prices fall below their estimates of the issuing businesses’ intrinsic values and sell when the securities’ prices approach or pass those intrinsic value estimates or when better opportunities arise. The managers wield this approach nimbly, often acquiring smaller, lesser-known issuers that they know better than other firms. Consequently, the fund’s portfolio doesn’t look much like the benchmark; for instance, it doesn’t own much of the ICE Bank of America Corporate & High Yield Index’s top 10 holdings.

Key Morningstar Metrics for BrandywineGlobal Corporate Credit

Morningstar Medalist Rating: Gold

Process Pillar: High

People Pillar: High

Parent Pillar: Average

Expertise Pays Off

Invesco Small Cap Value’s VSCAX collaborative managers earned the strategy a People rating upgrade to Above Average from Average and a Morningstar Medalist Rating upgrade to Bronze from Neutral for its A shares.

Manager Jonathan Edwards, who has been with the strategy since 2010 and took the lead in July 2018, draws on his extensive experience covering different sectors. His supporting cast is small but experienced, especially comanager Jonathan Mueller, who has excelled at picking industrials sector stocks, often the strategy’s largest sector weighting. The team’s strong collaboration and growing expertise mitigate workload concerns and bolster stock selection across sectors. The team uses both top-down and bottom-up methods. Edwards employs a qualitative scorecard to evaluate factors like secular trends and business cycle shifts, identifying companies overlooked because of short-term issues.

Key Morningstar Metrics for Invesco Small Cap Value

Morningstar Medalist Rating: Bronze

Process Pillar: Above Average

People Pillar: Above Average

Parent Pillar: Average

Experience and Resources Stand Out

Lord Abbett Short Duration High Income Municipal Bond’s SDHIX experienced managers and well-resourced analyst team helped the strategy earn a People Pillar upgrade to Above Average from Average, lifting its I shares’ Medalist Rating to Bronze from Neutral.

Veteran leaders have been crucial to the fund’s success. Manager Dan Solender, with over three decades of municipal experience, has led the strategy since 2015. Comanagers Gregory Shuman and Thomas Raleigh strengthen the team. They draw support from a 10-person analyst team averaging 13 years of industry experience and a data-driven quantitative team that provides municipal market insights.

Key Morningstar Metrics for Lord Abbett Short Duration High Income Municipal Bond

Morningstar Medalist Rating: Bronze

Process Pillar: Average

People Pillar: Above Average

Parent Pillar: Average