1- Bought ~3% position in PGIM High Yield Bond (ISD) for $14.06 per share using cash
PGIM (formerly Prudential Investment Management) this morning announced a shift in their investment strategy and changed the names on PGIMs two funds as well. In addition, they increased the distribution significantly which will almost assuredly contain some ROC but make them more competitive with the high yield CEF space. In terms of the name change, they are just taking out the "short duration" from both funds.
We think the company is doing the prudent (pun intended) thing by shifting their investment strategy now that we have moved away from a rising interest rate environment. The main draw of the funds previously was that they stayed with very short durations to avoid the headwind from rising rates. They can now add some duration and perhaps lever up more aggressively to increase their yields.
They are also removing the restrictions they had on the amount of junkier credits.
From their original prospectus, the fund was only allowed to invest up to 10% of its investable assets into securities rated CCC+ or lower.
Lower Rated High Yield Instruments. Although the Fund will invest primarily in below investment grade instruments, the Fund may not invest in issuers who are in default at the time of purchase. Additionally, the Fund may only invest up to 10% of its investable assets in high yield instruments rated in the lower rating categories (Caa1 or lower by Moody's, CCC+ or lower by S&P or Fitch, or comparably rated by another NRSRO) or, if unrated, are considered by the Subadviser to be of comparable quality, unless the Subadviser believes that the financial condition of the issuer or the protection afforded to the particular instruments is stronger than would otherwise be indicated by such low ratings. Such instruments are subject to very high credit risk.
The new policy allows no limit on that percentage.
The Funds have changed certain non-fundamental investment policies to permit the Funds to invest, under normal market conditions, in instruments of any duration or maturity and to remove the limit on investments in high yield instruments rated in the lower rating categories (Caa1 or lower by Moody's, CCC+ or lower by S&P or Fitch, or comparably rated by another NRSRO).
Please let us know if you have any questions.