In a recent ION Influencers Fireside Chat, John Sherman, Lead Portfolio Manager at Polen Capital, talked about how macroeconomic conditions create opportunities in the high yield space.

Background and Role

• Experience: 18 years at Polen Capital
• Roles: Lead portfolio manager for bank loan strategy and co-portfolio manager for opportunistic high yield strategy
• Assets Managed: $7 billion in credit franchise, part of Polen Capital’s $60 billion overall assets

Macroeconomic Conditions and Market Sentiment

• Market Strength: Strong at the beginning of 2025
• Shift in Sentiment: Recent volatility causing reevaluation of investments
• Debt Markets: Trade on sentiment rather than fundamentals

Historical Market Events

• Great Financial Crisis (2007-2008): Large recession and disruption
• Euro Debt Crisis (2012): Concerns about European debt and US fiscal issues
• OPEC Oil Price Drop (2015-2016): Impact on high yield market
• COVID-19 Pandemic: Short-term sentiment change and quick rebound
• Current Environment: Most analogous to the 2012 Euro Debt Crisis

Portfolio Management and Strategic Allocation

• Advice: Maintain long-term strategic plan, avoid timing the market
• Rebalancing: Between equities and fixed income, particularly high yield and leveraged loans
• Goal: Achieve equity-like returns with less volatility

Credit Opportunities

• High Yield and Loans: Attractive spread and credit quality
• Security Selection: Focus on avoiding companies in secular decline
• Market Position: Best in 20 years from a credit risk perspective

Market Dynamics and Private Equity

• Challenges: Lack of GDP growth and higher interest costs
• Trends: Dividend deals and secondary transactions
• M&A Activity: Predicted to be mediocre unless market certainty improves

Investor Sentiment and Risk Management

• Nervousness: Increased due to market volatility
• Advice: Evaluate portfolio allocations, consider high yield and loans for stable returns

Consolidation Among Managers

• Trend: Consolidation among asset managers
• Opportunities: Mid-sized firms have potential for growth

Conclusion

• Strategic Planning: Importance of maintaining a plan and focusing on security selection
• Market Navigation: Emphasis on understanding and adapting to current conditions

 
Key timestamps:

00:10 Introduction to the Fireside Chat
01:40 Current Macroeconomic Landscape
03:22 Historical Market Comparisons
05:27 Portfolio Rebalancing Strategies
09:13 High Yield Market Insights
12:26 Risk Assessment in Fixed Income
16:22 Characteristics of Successful Portfolio Managers
20:09 Market Dynamics and Opportunities
21:54 Challenges in M&A Activity
24:16 Investor Sentiment and Market Volatility
27:47 Future Trends in Asset Management