Meet the manager
James DiChiaro

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James DiChiaro

Senior Portfolio Manager
BNY Mellon Core Plus Fund

21 years' experience

Joined Insight Investment
(part of BNY Mellon) in 1999

How did you end up pursuing investing as a career?

I am always on the go and competitive by nature. Whether athletic events, financial markets or personal hobbies, I enjoy steep learning curves and competitive environments. Shortly after my undergrad, I started working at Merrill Lynch, supporting their mortgage-backed securities pass-thru desk. This was effectively my hazing into the financial markets – having tickets thrown at the back of my head for execution. It was certainly challenging, but I relished the fast pace and the need to perform at a high level within tight time constraints. Shortly after, I was responsible for issuing commercial paper which started me on the path to becoming a portfolio manager.

What do you like about working in asset management?

It’s been over 21 years now and each and every day I’ve found something new to learn. Investing always presents opportunities, even in down markets, and there is no place for complacency. This keeps me constantly engaged, regularly thinking of ways to engineer new and creative solutions to add value to our clients. It’s also incredibly applicable to many areas of life. Whether starting a new business or buying a new home, a keen understanding of finance can help set you apart.

What was your first foray into fixed income?

I started out in the high yield market in 1999 at TimesSquare Capital, formerly Cigna Investments. During my tenure there, the economy and the market lived through the telecom and Internet bust, which left a lasting impression about market cycles and investor psychology of both fear and greed. Investing in the high yield market, which sits on the crosshairs of equity and fixed income investing, helped me learn the skill of looking at investments from multiple angles, which I continue to utilize to this day.

My first role at Merrill Lynch was a good introduction to finance but my investment career really started when I began issuing commercial paper for an asset-backed conduit. This gave me an insight into the basic building blocks of money market funds and then the knowledge to become successful at constructing money market portfolios.

I then ventured into the capital markets building long duration municipal portfolios for a variety of client types and working on some short duration credit mandates. That experience gave me a solid understanding of the term structure of markets which eventually led me back into the credit markets, constructing multi-sector portfolios such as the BNY Mellon Core Plus Fund.

Describe your investment style?

People who spend time with me know I have many interests and pride myself on living a balanced lifestyle. As financial professionals, we spend much of our day sitting down behind a screen. I like to counterbalance that with physical exercise and hobbies. I believe in applying the same balance to portfolio construction through diversification.* No one can consistently and accurately project the return of any single asset class. I believe that the better way to participate in the financial markets is through a diversified set of investments where one can rely on multiple sources of alpha and implement their best ideas across multiple asset classes. It’s like how a multi-cylinder engine can keep firing to compensate if one cylinder breaks down.

How did you come to work at Insight?

I worked at Cutwater Asset Management, when it was acquired and integrated into Insight Investment in 2015. I developed a wealth of knowledge at Cutwater and then Insight took things to a whole new level. The collective resources of the global firm enable us, as portfolio managers, to further broaden our depth of knowledge of global markets, particularly given our collaborative meeting structures. At Insight we are also supported by a deep bench of credit analysts and our ultimate goal is achieving consistent and repeatable alpha generation.

What makes you different from other managers in your space?

I can’t say how others operate but I can tell you how I do. When investing in the competitive financial market environment, it is easy to allow emotion to affect your investments. Whether it’s the gyrations of the spread market trying to buck you off the high yield horse or a surprising interest rate rally that you wish you had set up for – there is no sense in worrying about what you should have done yesterday or getting upset about what did or didn’t occur in the markets. Tying emotion to investing can lead to bad decision-making and fickle idea-generation.

I also don’t view investing as a game where you will win day-in and day-out. It simply doesn’t work that way and so I invest for the longer term. Does that mean I am not making adjustments every day? No. I review our strategies daily but within the context of thinking about the longer-term investment horizon. This allows me to come up with a thoroughly-vetted and fundamental picture of the economy and the credits that we choose to invest in.

What past experience outside of portfolio management do you bring to your process?

I am a builder and fixer by nature and I see my projects through to completion. Whether it’s setting a workout schedule and sticking to it, or promising my wife that I will rebuild the shed, I do what is needed to deconstruct a project, fix it, and see it through to the end.

What would set off warning bells when looking at a new investment?

Management’s past actions and weak deal covenants in an uncertain market are a good starting point. History can repeat itself and when you have a weak management team in place I find a higher correlation of things going wrong and at the absolute worst time. Additionally, as excesses build in the markets and the reach for yield becomes more entrenched, there have been many times where I have seen issuers weaken deal covenants. More times than not that ends up costing you down the line.

 

1 References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities.

 

*Asset allocation and diversification cannot assure a profit or protect against loss in declining markets.

Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. To obtain a prospectus, or a summary prospectus, if available, that contains this and other information about a fund, investors should contact their financial advisors or visit im.bnymellon.com. Investors should be advised to read the prospectus carefully before investing.

RISKS

All investments involve risk, including the possible loss of principal. Bonds are subject to interest-rate, credit, liquidity, call and market risks, to varying degrees. Generally, all other factors being equal, bond prices are inversely related to interest-rate changes and rate increases can cause price declines. Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks generally are greater with emerging market countries. High yield bonds involve increased credit and liquidity risk than higher-rated bonds and are considered speculative in terms of the issuer’s ability to pay interest and repay principal on a timely basis. The use of derivatives involves risks different from, or possibly greater than, the risks associated with investing directly in the underlying assets. Derivatives can be highly volatile, illiquid, and difficult to value and there is the risk that changes in the value of a derivative held by the portfolio will not correlate with the underlying instruments or the portfolio’s other investments.

DEFINITIONS

Commercial paper: Unsecured, short-term debt instrument issued by a corporation, typically for financing of accounts payable and inventories and meeting short-term liabilities. Fixed income: A type of investment security that pays investors fixed interest payments until its maturity date. Long duration and short duration: Duration is a measure of the sensitivity of a price of a bond or debt instrument to change in interest rates. A fund with longer duration holds bonds that have longer maturities, typically 10 years or more. Credit market: The market which companies and governments issue debt to investors, such as investment grade bonds, high yield bonds, and short-term commercial paper. Multi-sector: An investment style that invests in across multiple areas of the economy in which businesses have different related product or services. Alpha: Active return on an investment that gauges the performance of an investment against a market index or benchmark that is considered to represent the market’s movement as a whole. Spread: The gap between the bid and the ask price of a security or asset, like a stock or bond. Credits: A contractual agreement in which a borrower receives something of value now and agrees to repay the lender on a later date—generally with interest. High yield: A high paying bond with a lower credit rating than investment-grade corporate bonds, treasury bonds and municipal bonds. Deal covenants: Designed to protect the interests of both parties, where the inclusion of the covenant is in the bond’s indenture, which is a binding agreement between two or more parties. Yield: Earnings generated and realized on an investment over a particular period of time, and is expressed in terms of percentage based on the invested amount of the security.

BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, with $1.8 trillion in assets under management (as of 6/30/19). It encompasses BNY Mellon’s affiliated investment management firms, wealth management services and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally. More information can be found at www.bnymellon.com.

Insight Investment advisory services in North America are provided through two different investment advisers registered with the Securities and Exchange Commission (SEC), using the brand Insight Investment: Insight North America LLC (INA) and Insight Investment International Limited (IIIL). The North American investment advisers are associated with other global investment managers that also (individually and collectively) use the corporate brand Insight Investment and may be referred to as “Insight” or “Insight Investment.” The sub-adviser for the BNY Mellon Core Plus Fund is IIIL, an affiliate of BNY Mellon Investment Adviser, Inc.

Views expressed are those of the advisor stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Please consult a legal, tax or investment advisor in order to determine whether an investment product or service is appropriate for a particular situation. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. BNY Mellon Investment Adviser, Inc., Insight Investment and BNY Mellon Securities Corporation are companies of BNY Mellon. ©2019 BNY Mellon Securities Corporation, distributor, 240 Greenwich Street, 9th FloorNew York NY, 10286.

 

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