Kathryn Glass, co-head of high-yield group at Federated Hermes
Courtesy: Federated Hermes Inc.
Federated Hermes’ Kathryn Glass wasn’t all the time set on a profession in finance. But lately she’s co-heading her agency’s high-yield fixed-income group — and attempting to navigate a market that some say has gotten too costly.
Glass, who was promoted to the place in February after 27 years within the enterprise, at first appeared destined for a profession in Japanese language and literature.
She acquired a bachelors of arts diploma within the topic from the College of Pittsburgh and spent her junior yr overseas in Japan. She then bought a masters diploma in Japanese literature from Cornell College in upstate New York. It wasn’t till her Ph.D. program that she shifted gears — dropping out and getting an internship at Federated Hermes. It additionally introduced her again dwelling to Pittsburgh, the place she grew up.
“I used to be employed at Federated in our muni bond group and cash market group, which was the identical group on the time, as a result of that they had numerous publicity to Japanese banks, letters of credit score,” stated Glass, who minored in math throughout faculty. “It was a two-year program, the place I may be taught finance and so they had been keen on my language expertise.”
She was hooked. Glass then went to the Tepper Faculty of Enterprise at Carnegie Mellon College, additionally in Pittsburgh. She earned her masters in accounting and finance and, in 1999, returned to Federated Hermes, becoming a member of their high-yield group as an analyst.
“The rationale I in the end actually bought within the analyst aspect of this enterprise is as a result of, sure, you want to do math, however you additionally want to have the ability to work together with individuals, learn 10-Ks, learn 10-Qs, perceive technique,” Glass stated. “The grey elements of that is actually the place you are in a position to shine.”
Collectively, Glass and co-head Mark Durbiano lead a crew of 16 within the high-yield fixed-income group. They handle about $13 billion in U.S. high-yield fastened revenue methods as a part of Federated’s $98 billion in fixed-income belongings as of Dec. 31, 2024. Glass can be a senior portfolio supervisor.
Discovering the suitable tales
The funding course of is reliant on analysis from its analysts, who’ve a backside up strategy, firm stability sheets moderately than macroeconomics, she stated. She describes the approach as extra akin to small-cap fairness evaluation than investment-grade company evaluation.
“Excessive yield, it is tales. There’s a number of causes firms are in our market. Our job is to get to know the administration groups, perceive their priorities, [and] proceed to observe it for the lifetime of the funding,” she stated.
“It is a fairly labor intensive focus to get names out and in of the portfolio,” she added. “We wish to experience our winners, however we additionally wish to get away from the losers.”
The strategy, as seen in its Institutional Excessive Yield Bond Fund (FIHAX), will get kudos from Morningstar. The mutual fund researcher stated the Federated fund “stands out due to its long-tenured administration crew and differentiated funding strategy.” FIHAX has a 30-day SEC yield of 5.96% and a 0.75% web expense ratio.
Federated Hermes Institutional Excessive Yield Bond Fund (A shares) in 2025.
Placing her technique to work
Investing in excessive yield hasn’t been simple on this market, Glass famous. She’s positioned cautiously proper now as a result of spreads — which measure junk bonds’ extra return over risk-free Treasurys — are tight.
“It is nearly a Goldilocks-type state of affairs the place the financial system has chugged alongside fairly properly — however are you getting paid for threat?” she stated. “Whereas valuation is a horrible timing instrument, it ought to positively be a guidepost for you.”
As a result of the fund is thought for being “very pure excessive yield,” shying away from financial institution loans and money as a strategic instrument, she has moved into lower-spread names.
“They’re all nonetheless rated within the junk bond market, however the market is pricing them to point out that they are increased high quality issuers,” she defined.
Now, she waits for a shopping for alternative.
“Individuals must be conscious that we’re priced to perfection at this cut-off date,” Glass stated.
“We will bounce alongside right here for a bit longer, however sooner or later you’ll have a shock that sends spreads wider,” she added. “Higher to be positioned extra cautiously and be prepared to return into the market aggressively when that occurs.”
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