Brandywine Global portfolio managers John McClain and Bill Zox pride themselves on being different. Their Corporate Credit Fund, which trades under the ticker BCAAX for retail investors, largely focuses on high-yield bonds. Yet the pair have a unique playbook that seeks to exploit what they see as structural inefficiencies in the market. The result is that the bulk of the fund’s holdings aren’t found in the top 100 issues of the ICE BofA U.S. High Yield Index benchmark, according to Morningstar. “To actually generate alpha, you have to stand out by not fitting in,” McClain said. They also don’t chase yield. BCAAX has a 30-day SEC yield of 6.38%, while its institutional shares via ticker BGISX have a 7.01% 30-day SEC yield. That’s a lesson McClain learned when he started in the business during the 2008 global financial crisis and saw people reaching for yield and bearing too much risk. “We’re adaptable. We’re flexible. We move around within the marketplace and we don’t bear undue risk, which has really been the key to our success in terms of growing assets,” he said. The fund currently holds a little over 70% in high-yield bonds, 10% in cash and about 18% in investment-grade bonds. The tactic has paid off. The fund is one of the best performers over the last one-, three- and five-year time frames, according to Morningstar , which has a five-star rating on the fund. BCAAX has a one-year trailing total return of 10.21%, while its three-year trailing total return is 2.38% and five-year trailing total return is 5.33%. It also has an adjusted expense ratio of 0.88%. Focused on being best, not biggest Zox started the fund in 2002 while at Diamond Hill, and McClain joined him in 2014. Brandywine Global, which is part of Franklin Templeton, bought the fund in 2021. McClain said they are a “small part of a small part of a very large organization,” which gives them access to resources but the ability to operate like a smaller entity. The office is located in a former dairy manufacturing facility in Columbus, Ohio, that was converted into a food hall, complete with a beer garden and overlooking an alley with trash cans. McClain and Zox believe they have a competitive edge because they often invest in areas of the market often disregarded by their larger counterparts. “We’re focused on being the best, not the biggest,” McClain said. “What it does is it allows us to compete with less competition in a more inefficient part of the marketplace, because the big managers…
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