| Details for Investment Manager | ||
| Investment Manager |
Prudential Investment Management Inc.2 Gateway Center, 4th FloorNewark, NJ 07102-5096 |
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| Asset Class and Objective | Specialty high-yield bond fund | |
| Fund Benchmark | Barclays Capital Ba-B 2% Issuer Capped Bond Index | |
| Management Type | Actively Managed | |
| Investment Manager | Prudential Investment MAnagement Inc., 2 Gateway Center, 4th Floor, Newark, NJ 07102-5096 | |
| Marketing Company | Prudential Retirement Services | |
| Restrictions on Transfers | Investment funds in the FRS Investment Plan are subject to excessive trading restrictions as detailed in the FRS Investment Plan Summary Plan Description and FRS Excessive Fund Trading Policy. | |
| Information on Transition of Assets from PIMCO High Yield Fund | The FRS Select High Yield Fund is being opened as a replacement for the PIMCO High Yield Fund which has been terminated as an investment option in the FRS Investment Plan. Because high yield fixed income markets are often volatile and not every security trades every day, the transfer of assets from PIMCO high Yield to the FRS Select High Yield, will take place in an orderly fashion over the course of the first 4 weeks of January 2010. During that transition, FRS High Yield will consist of a blended account of the shares in PIMCO High Yield held by FRS IP members as of 12/31/2009 and new shares in the Prudential Higher Quality High Yield commingled fund managed by Prudential as described below. The daily net asset value reported will be a blend of the market changes in both underlying funds. All payroll contributions and fund transfers into the FRS High Yield Fund will be credited to the Prudential account. All distributions and fund transfers out of the FRS High Yield Fund will be taken from the PIMCO High Yield Shares. Once all the shares in PIMCO High Yield have been sold, all transactions will be conducted through the Prudential account and the temporary blended account will no longer be used. | |
| Fees and Expenses | Fees and expenses are only one of several factors that should be considered when making investment decisions. More information on fees and expenses can be found in the FAQs on the MyFRS.com website. | |
| Investment Philosophy | Prudential fixed Income attempts to achieve consistent outperformance versus the broad high yield market with a high information ratio through actively managed higher quality high yield bond portfolios, constructed from the bottom up using methodical, research-based subsector and security selection. The Higher Quality High Yield Strategy seeks to provide +150 bps of excess return over a high yield market benchmark over a full market cycle (typically five to seven years), depending on a client's individual guidelines and constraints. Prudential expect this excess return will come from three disciplines: security selection (60%), subsector/industry selection and rotation (30%), and trading (10%).. |
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| Research Process | Intensive fundamental research is conducted by a large and experienced internal credit reserach staff to identify strong and improving credits. The size and experience of the research organization permits Prudential to apply intense focus on individual securities identified from a broad pool of investment opportunities. Portfolios are then actively managed to capture the best opportunities and minimize credit losses, within an environment of disciplined risk management oversight. |
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| Security Selection | Prudential Fixed Income does not take extremely large positions, either on an absolute basis or relative to benchmarks, in any single issuer or industry as a primary means to achieve outperformance, nor do they hold a significant portion of the portfolio in an asset class other than US high yield bonds, such as common stocks or emerging markets. | |
| Portfolio Construction | 1) Prudential Fixed Income believes that actively managed higher quality high yield bond portfolios, constructed from the bottom up using methodical, research-based subsector and security selection, can lead to consistent outperformance versus the broad high yield market with a high information ratio. 2) "Pure" Approach: Prudential does not stray materially from the high yield asset class, into either equities or other non-benchmark asset classes, in search of total return. They believe this "pure" approach most effectively provides investors with expected exposure to the asset class. 3) Higher Quality Bias: Focus on the upper quality tiers of the high yield market: B and BB credits. BB rated high yield bonds have historically outperformed lower quality bonds, repaying their principal often enough to more than offset their ex-ante yield disadvantage (as measured by Barclays Capital.) 4) Focus on Downside Protection: Heavy focus on downside protection. While this may lead to slightly lower returns in "boom" markets, it reduces downside risk, minimizes tracking error, and leads to stable returns over time. 5) Broad Coverage of High Yield Market: The depth of the firm's high yield resources - 11 high yield credit analysts and six portfolio managers/traders - enables us to follow large number of issuers, including companies not followed closely by Wall Street or other asset managers. The high yield portfolio management and research teams are organized by industry/subsector, with portfolio manager/analyst aligning as a team to cover an industry, developing in-depth knowledge of all companies in that industry. |
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| Sell Discipline | For high yield bonds, Prudential Fixed Income's sell decisions are generally predicated on a) the company's fundamentals seem likely to deteriorate, or - b) there is an opportunity to improve the overall portfolio. | |
| Portfolio Manager(s) | ||
| Name | Investment Experience | Experience Last 5 Years |
| Michael Collins | 16 years | Senior Investment Officer and Credit Strategist. |
| Steve Haeckel | 20 years | Principal and High Yield Portfolio Manager. |