Peter Schwab is the Senior Vice President and Portfolio Manager of the Pax High Yield Bond Strategies at Pax World Management. Prior to joining Pax, Mr. Schwab was a Managing Director on the High Yield Bond and Loan Team at Goldman Sachs Asset Management.
Mr. Schwab identifies, analyzes and invests in high yield securities that meet the firm’s criteria for suitability from an ESG standpoint. “High yield bonds, in general, tend to act somewhat like hybrid securities between bonds and equities, and are highly correlated with equities, but with less risk in general than the stock market. Within the fixed income asset class and relative to other high yield bond funds, the primary differentiator for this fund is that we have full integration of ESG — environmental, social and governance — factors into portfolio security selection.”
In an ESG portfolio, what is often of interest is what the portfolio manager leaves on the table: “Chesapeake Energy (NYSE:CHK) is a good example, which is a very large issuer in the high yield market more broadly. We were interested in the company from a financial standpoint as the sector started to recover, but its track record was not only filled with environmental challenges, but also actually had some pretty severe governance problems.”
A stock that did make the cut as a portfolio pick is HCA (NYSE:HCA): “… one of our largest, most liquid and longest-held high yield issuers. It is a large hospital company that is strong and BB rated, which is about as highly rated as we get…”
To see the investment rationale for the rest of Mr. Schwab’s high yield ESG portfolio picks, read the entire interview at the Wall Street Transcript.