While BondSavvy founder Steve Shaw is the leading expert in recommending individual corporate bonds to individual investors, he is not the only fixed income expert. Major investment banks have fixed income research departments, which provide a variety of investment analysis across various fixed income asset classes.
Corporate bonds fall under the category of "credit research," as such research is focused on evaluating the underlying credit quality of bond issuers. A lot of what institutional credit research does is similar to companies that make corporate bond ratings. This is separate from interest rates research, which focuses on trends driving interest rates and Treasury yields higher or lower.
Figure 1 provides some of the key differences of BondSavvy's investment recommendations vs. institutional credit research:
Figure 1: BondSavvy vs. Institutional Credit Research
|Institutional Credit Research|
|End User||Individual investors||Almost exclusively institutional investors|
|Scope of coverage||20-25 CUSIP-level recommendations each year where we identify bonds we believe can beat the market||Broad, sector-by-sector coverage, which is more focused on quantity than quality|
|Frequency||Quarterly new buy recommendations and quarterly updates||Fluctuates|
|Level of bias||None. No conflicts of interest. We have no banking relationships with the issuers of our recommended bonds. We make recommendations based entirely on their merits.||Research coverage can be tied into a new corporate bond issuance being underwritten by the investment bank. Research can often be in support of the bank trying to sell bonds.|
|Scope of recommendation||Rationale for investing in a specific CUSIP, including a bond's price and YTM relative to its credit spread, interest rate risk, capital allocation, and other factors included in our bond investment analysis.||Credit quality of the issuer|
BondSavvy's goal is to provide corporate bond investment recommendations that achieve investment returns higher than bond funds. It's a very different proposition than institutional credit research providers, which have to cover hundreds of companies. They provide research on companies regardless of whether they issue bonds that are worth buying. At BondSavvy, we only issue recommendations for corporate bonds we believe can outperform the market.
In addition, our focus is on individual investors investing in individual corporate bonds. A key part of our investment analysis is evaluating the level of liquidity in CUSIPs BondSavvy is considering recommending. Steve Shaw previously led Tradeweb direct, a company that built technology that powered bond trading at retail brokerages. His ability to assess the level of liquidity in corporate bonds on the major retail brokerages is a valuable analysis BondSavvy provides its investment newsletter subscribers.
Before BondSavvy, individual investors had few places to turn for investment analysis on corporate bonds. Institutional credit research is generally not available to individual investors, and Moody's and S&P corporate bond ratings have many flaws, which limit their value to individual investors.
We take the step traditional credit research does not, which is to narrow down individual corporate bond investment opportunities to a small number
we believe can outperform the market. Traditional credit research covers a broad range of corporate bonds; however, since it largely ignores
a bond's price, YTM, liquidity, and maturity date, it's a far less valuable assessment than the corporate bond recommendations BondSavvy provides subscribers.