Objective: The Penn Capital Defensive Short Duration High Income Fund seeks to provide a high level of current income.
Strategy: The Fund seeks to achieve its investment objective by investing, under normal circumstances, primarily in short-term fixed income securities and senior floating rate loans that are rated below investment grade (i.e. “junk” bonds and loans).
Investment Type Examples: Fixed income securities in which the Fund may invest include debt securities such as bonds, notes and debentures.
Industry Examples: Aerospace & Defense, Consumer Products, Food & Drug Retail, Financials, Healthcare, Media/Broadcasting, Metals and Mining, Printing/Publishing, Telecommunications, and Utilities.
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 our 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
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 the company watch list with further due diligence required
Peter R. Duffy, CFA, Partner, Senior Portfolio Manager
Mr. Duffy began his career with Penn Capital in 2006. Prior to joining Penn Capital, Mr. Duffy was a Director for Deutsche Asset Management’s top-decile $5 billion global high yield debt team, and his investment experience included both leveraged loans and emerging markets debt. Previously, he worked on mergers & acquisitions at GE Capital and as a management consultant at Arthur Andersen LLP. Mr. Duffy serves as the Portfolio Manager for Penn Capital’s Defensive High Yield and Short Duration strategies and chairs the firm’s Credit Strategy Committee. He received a BS in Finance, Summa Cum Laude, from Villanova University and an MBA from The Wharton School of the University of Pennsylvania.
Richard A. Hocker, Founder, Chief Investment Officer
Richard founded Penn Capital in 1987 and serves as Chief Investment Officer & Chief Executive Officer, guiding overall portfolio strategy. Richard’s 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, Richard was responsible for building the investment side of DIA’s fixed income operation. During this period, Richard developed and managed one of the nation’s first high yield mutual funds, the Delchester High Yield Bond Fund. Richard 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, Richard 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. Richard 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.
Mr. Hocker 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. Richard received both his BS in accounting and MBA in finance from the Kogod School of Business at American University.