The PIA High Yield Fund’s primary objective is to seek a high level of current income.
Style Benchmark: Bloomberg Barclays U.S. Corporate High Yield Index
Fund Assets: $82 million
Fund Inception: 12.31.10
Expense Ratio: 0.95%
*Net Expense Ratio: 0.76%
We know that defaults have been largely correlated by industry, so we defensively seek to underweight those industries, where we can identify negative secular trends. We believe that “value” driven company-specific analysis can capture excess returns from companies that demonstrate they can generate free cash flow throughout an economic cycle and tend to overweight small and thinly followed issues, where our comparative advantage is greatest and where we believe we are being paid well for the risk.
The PIA High Yield team has extensive experience in the high yield and bank loan space and has employed the same disciplined and fundamental approach throughout their careers to evaluate opportunities in leveraged finance. PIA believes we can add value in high yield from our top-down decision-making, because we are willing to completely avoid industries that we believe do not warrant leveraged finance over the current business cycle. Additionally, we have the conviction to take added credit risk within industries that we favor.
Once we find an industry whose economics we believe to be resilient enough to tolerate high financial leverage, our analysis shifts to a very granular “bottom-up” approach. We believe this is particularly important with the mid-cap and small-cap companies, which we tend to overweight. Such companies, though smaller, can still dominate small niches. In fact, we have invested in some relatively small but oligopolistic industries through several cycles of leveraging and deleveraging. We believe that relative size within these industries is much more important than absolute size in determining the staying power of a company and smaller companies, being less followed and having fewer comparable credits, give our industry-specialization model greater opportunity to develop comparative advantages in both information and analytical judgment.
We believe that a key strength is our team’s significant experience and the following characteristics, which differentiate us from competitors:
*The Adviser has contractually agreed to waive all or a portion of its management fees and pay Fund expenses to ensure that Net Annual Fund Operating Expenses (excluding AFFE, interest, taxes and extraordinary expenses) does not exceed 0.73%. The Expense Cap will remain in effect through at least March 29, 2018.
Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The Fund may invest in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks may increase for emerging markets. Investment by the Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities. The Fund may invest in derivatives, which may involve risks greater than the risks presented by more traditional investments. The risk of owning an ETF or mutual fund generally reflects the risks of owning the underlying securities that the ETF or mutual fund holds. It will also bear additional expenses, including operating expenses, brokerage costs & the potential duplication of management fees. These risks are fully disclosed in the Prospectus.
Bond ratings provide the probability of an issuer defaulting based on the analysis of the issuer’s financial condition and profit potential. Bond rating services are provided by Standard & Poor’s, Moody’s Investors Service, and Fitch Investors Service. Bond ratings start at AAA (denoting the highest investment quality) and usually end at D. (meaning payment is in default)
The Bloomberg Barclays U.S. Corporate High Yield Index covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issues from countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeroes, step-up coupon structures, 144-As and pay-in-kind bonds (PIKs, as of October 1, 2009) are also included. The index includes both corporate and non-corporate sectors. The corporate sectors are Industrial, Utility, and Finance, which include both U.S. and non-U.S. corporations. The Yankee sector has been discontinued as of 7/1/00. The bonds in the former Yankee sector have not been removed from the index, but have been reclassified into other sectors. You cannot invest directly in an index.
Free Cash Flow – revenue less operating expenses including interest expenses and maintenance capital spending. It is the discretionary cash that a company has after all expenses and is available for purposes such as dividend payments, investing back into the business or share repurchases.
Diversification does not guarantee a profit or protect from loss in a declining market.