Description
Fountain Capital Management, L.L.C. (Fountain) is an independently managed investment advisor (an affiliate of Atlantic) that specializes in the management of non-investment grade credits.
Fountain’s Short Duration High Yield strategy invests in the BB and B rated segments of the non-investment grade market. The strategy focuses on seasoned credits with maturities of 7 years or less. As a result, portfolio duration is typically around 2 years.
Philosophy
Fountain invests in bonds of companies with improving fundamentals in growing industries. A high rate of "upgrades", attractive yields, and the low interest rate risk of a short duration posture lead to outperformance of investment grade portfolios with similar duration orientations.
Investment Process
Sector Selection
A top-down approach is used to identify and overweight industries with the highest and most sustainable growth prospects; and conversely, to underweight or avoid industries where there is a higher risk of downgrades and defaults.
Security Selection
Fountain uses a bottom-up approach to identify companies within favored industries that have strong free cash flow, established debt service records, and asset values well above debt levels. Only bonds that are rated at least B3/B- by either Moody’s or S&P are purchased.
Research
Fountain analysts perform all credit research in-house. Each analyst is responsible for specific industry coverage.
Sell Discipline
It takes a unanimous vote of the investment committee to establish a position, and only one committee member's vote to sell. Sales typically occur when analysts identify deterioration of credit fundamentals, management or management philosophy change, or the security becomes overvalued.
____________________________________________________________
Benchmark
Various high yield indices are referenced.
Minimum Account Size
Separate account: $20,000,000, which may be changed at Fountain’s discretion.
Commingled fund: $1,000,000, which may be changed at Fountain’s discretion.
In addition to the product featured herein, Fountain offers Total Return High Yield management. Traditional Short Duration bond management and a Short Duration High Yield ESI product are also offered by Atlantic.
Footnotes
Past performance is no guarantee of future results. No part of this publication may be reproduced in any form, or referred to in any other publication, without express written permission. Information has been obtained from sources believed to be reliable but not guaranteed. All investments managed by Atlantic or its affiliates or otherwise described herein entail risks, including the risk of principal loss. Please see the “Terms of Use” page of our website for important information and disclosures relating to this website and our services. This is not a recommendation or offer of any particular security, strategy or investment product, but is distributed for educational purposes only.