Objective: The objective of the Penn Capital Defensive Floating Rate Income Fund seeks to provide current income.
Strategy: The Fund seeks to achieve its objective by investing, under normal circumstances, at least 80% of its net assets in floating rate senior secured loans, floating rate senior corporate debt and other floating rate senior instruments.
Investment Type Examples: Bank loans, bonds, debt securities and other similar instruments issued by various domestic and foreign entities
Sector and Industry Examples: Consumer Staples, Financials, Food, Beverage & Tobacco, Healthcare, Lodging & Leisure, Metals and Mining, Packaging, Technology, and Services
Penn Capital’s initial universe consists of all U.S. dollar denominated, non-investment grade corporate debt (over $1.5 trillion market; over 1,000 issuers)
Step 1 – Economic Outlook
Penn Capital’s team determines industries with potential relative value: the economic cycle, business environment, industry/sector analysis, and interest rates
Step 2 – Quantitative Screening
Penn Capital’s analysts and portfolio managers screen industries for companies with higher spreads to treasury relative to: comparable companies, industry averages, and historical averages
Step 3 – Other Proprietary Sources
Penn Capital’s analysts and portfolio managers source ideas from leveraging Penn Capital's equity relationships: equity investment styles & conferences, IPO & competitive intelligence, management meetings and road shows, industry experts, ex-government officials
Step 4 – Improving Fundamentals
Penn Capital's analysts and portfolio managers further screen for companies with improving financial metrics such as Debt/EBITDA, EBITDA/interest expense, free cash flow/debt
Step 5 – Liquidity Outlook
Penn Capital's analysts and portfolio managers screen for liquidity issues and perform research such as covenant analysis, bank loan availability, and asset value analysis
Step 6 – Qualitative Research
Penn Capital's analysts and portfolio managers then perform qualitative research such as company management, strong fundamentals, positive catalysts, suppliers/customers /competitors, and industry experts
Step 7 – Penn Capital Risk Rating (PRR)
Primary and secondary analysts and portfolio managers assign the proprietary Penn Capital Risk Rating (PRR) which includes forward looking estimates of credit quality, quantitative/qualitative factors, and rating agencies static
Step 8: Team Review and Approval
The investment team consists of all portfolio managers and analysts; daily team meetings are primary forums for discussion and a consensus at team level is required prior to moving a recommendation on to High Yield Credit Committee
Step 9: High Yield Credit Committee Approval*
Committee confirms PRR and relative value: review of ideas approved by investment team, considers impact of credit on portfolio construction
*After Step 9, an idea is either approved for portfolio inclusion or dismissed to company watch list with further due diligence required
David Jackson, CFA, Partner, Portfolio Manager
Mr. Jackson began his career with Penn Capital in February 2008. Prior to joining Penn Capital Mr. Jackson was an Associate Director with the Financial Institutions Group at Fitch Ratings in New York City, where he assisted with rating coverage of the specialty finance sector. Prior to Fitch, he worked for the Federal Reserve Bank of Philadelphia on the bank supervision and regulation team. Mr. Jackson currently serves as a Portfolio Manager for Penn Capital’s Distressed strategy. He received a BS in Finance from Rutgers University School of Business.
Richard A. Hocker, Founder, Chief Investment Officer
Mr. Hocker founded Penn Capital in 1987 and serves as Chief Investment Officer & Chief Executive Officer, guiding overall portfolio strategy. His investing and institutional non-investment grade corporate lending experience spans over forty years. While serving as a Partner for Delaware Investment Advisors (DIA) from 1977 to 1987, he was responsible for building the investment side of DIA’s fixed income operation. During this period, Mr. Hocker developed and managed one of the nation’s first high yield mutual funds, the Delchester High Yield Bond Fund. He also served as the first high yield bond manager for a number of institutional clients including General Motors, State of Vermont Teachers Retirement Association, and Colorado Fire and Police. Prior to DIA, Mr. Hocker trained as a corporate lender and supported key senior lenders at Provident National Bank, which is now PNC, a top 20 US Banking institution. He later rose to serve as head of the investment division. Mr. Hocker also founded and served as CEO of Covenant Bank, a NJ based regional bank which grew to 16 branches and $500mm in deposits before being acquired by Wachovia Corporation in 1997.
He and his wife, Marcia Hocker, are the founders of the Ethel Mae Hocker Foundation. The Ethel Mae Hocker Foundation provides educational opportunities to less fortunate, deserving Greater Philadelphia-area elementary and high school students. Mr. Hocker received both his BS in accounting and MBA in finance from the Kogod School of Business at American University.