The Ultra Short Plus Credit strategy – 3 questions to Emmanuel Schatz

The Credit Ultra Short Plus strategy is popular with investors year after year, how do you explain it?
Indeed! The Credit Ultra Short Plus strategy attracts investors thanks to its distinctive positioning: we identify investment opportunities regardless of market conditions, to meet investors’ needs in terms of return. Since its inception, the strategy has experienced regular inflows, of which more than €1 billion over the past 12 months, reaching €2 billion in assets under management.

In addition, the ECB's key rate hikes since 2022, which are currently at the highest in 15 years, have revived investments in short term rates. They offer a defensive positioning while providing a return considered to be attractive.

What are the characteristics that have made the Credit Ultra Short Plus strategy so resilient over time?
Our approach has a differentiating positioning between the money market and the credit market. Investment is guided by money market guidelines regarding maturities and interest rate sensitivity. However, it benefits from greater freedom in the choice of issuers, with a rigorous selection process.

Another distinguishing feature is the interest rate risk approach, which must be kept at a very low level by indexing at least half of its assets to the overnight rate. If necessary, indexation may go up to 100% of the net assets to fully shield the portfolio from changes in interest rates. Secondly, the investment process limits bond maturities to a maximum of two years and their average maturity to one year. Bonds are usually held to maturity. The strategy aims to offer low volatility.

How do you select issuers in your portfolio?
Issuer selection is the main driver behind value creation. The selection is made between corporate bonds of all sectors with a mandatory maturity of less than two years. The investment team aims to build a diversified portfolio by targeting companies with a strong business model and good visibility in terms of revenue. Issuer selection is primarily based on fundamental financial analysis.

To identify quality issuers, we rely on one of the largest credit research teams in Europe: 23 credit analysts on three continents cover more than 1200 issuers worldwide. This is a key element for an appropriate selection of investment opportunities.

Ostrum AM's ESG approach adds added value. The investment process for each issuer is based on three main ESG components: ESG rating; carbon intensity; and the existence of a formal anti-corruption policy. The portfolio is also managed within the framework of Ostrum AM's sector and exclusion policies, in particular as regards coal, oil and gas, tobacco and controversial weapons.

Any investment involves risks, including the risk of capital loss. For more information about this strategy, please refer to our website www.ostrum.com.