Francisco Ghiglino, a fixed-income salesperson who joined Penserra in 2012, is a proven industry veteran who has worn many hats in a career spanning over two decades. In today’s Penserra Profile, Francisco describes how he traveled from Peru to Wall Street, and what he expects to happen will happen to fixed income markets in 2020.
Q: You have extensive knowledge and experience in both high yield and distressed debt markets. Given the present level of interest rates and equity markets, what do you believe institutional fixed-income customers need to do in 2020 to match their performance benchmarks?
A: 2020 is going to be a tricky year. We have been riding at the top of the credit cycle for quite some time and have seen a few BB credits issue bonds with a 4% handle, but given the low interest rate environment, spreads might still make sense. As a benchmark, today’s yield to worst are: BB @ 4.10%, B @ 6.01% and CCC @ 12.50%. In this part of the cycle you have to make sure you avoid land mines that can hurt your performance, and it becomes more important to maintain discipline and follow the investment process and good predictive credit work (bottom up) that can help with an edge. If you manage vs. a benchmark, you must equal weight or overweight the perceived improving credits. You must manage appropriately the cyclical names. I would be worried of the deep cyclicals and would stick to the top of the capital structure and shorter duration. Try to invest in asset rich and free cash flow generating companies. If the investment style of the institutional investor is more stress/distress, it would depend if you are buying for control or just performance. In the latter, it would mean that you could be going long or short. In any case, the very smart distress guys have already line up capital calls to invest in an around the point of inflection on the upside during the next recession. There are some opportunities for distressed investors, but it is a crowded market and some opportunities do not stay there for long, and the distressed investor loves to see sellers in distress. The market has grown, and you must look at loans, bonds and CDS and need to understand the impact of ETFs to individual credits on the price of the bonds and the volatility that an origination or redemption would do on a daily basis. I suspect when the perception of risk (risk premium) increases, we will see persistent redemptions and we will see a lot of volatility on the downside. In the Loan/CLO world today we are seeing dramatic downside on prices of some CCC loans. Once the CCC basket in a CLO gets full they need to sell what they can’t hold.
Q: You were born in Peru and graduated from the University of Lima with a Bachelor of Science degree in industrial engineering. You later earned a CFA (Certified Financial Analyst) certification. What factors convinced you to pursue a career in finance versus engineering?
A: I did not mastermind a perfect path to finance. When I finished the university and began to look for opportunities in industrial engineering, there were few that I could find and almost no pay. I began to work as a systems analyst at a conglomerate (La Fabril) and began to study a second career in Economics at the Universidad de Lima. While working and studying I applied for a traineeship through the University and got matched to go to the Minister of Economics in Dan Haag, Netherlands. It is then that I decided to try to do a masters in the United States. I had a sister leaving in Washington, DC that offered to help me financially if I got into a good school. Thus, I quit my job in Peru (I had a leave of absence), decided to travel (hitch hike) in Europe, got another traineeship in Poland, and then landed in Washington DC. My English was awful (my GMAT scores where excellent in Math and worse than pathetic in English). While I thought I was a Big fish in Peru, I found out I was a Little fish in the USA. I didn’t get accepted to any university that I applied to, I had no money, and my sister had good intentions but no real financial pockets. Nobody would loan me a penny. Only NYU wrote me back they liked my background and encourage me to improve my English and take the GMAT again and apply. It took me 2 years of studying and working in any job I could get. I sold advertisements for El Latino Newspaper, the Spanish Radio, Spanish TV and Hispanic Yearbook. I managed to get a scholarship from an international organization and NYU accepted me for the MBA program to study international business and finance.
How I landed in Finance doing Junk Bonds (High Yield) was pure luck. The opportunity presented itself while I was working at the PCLab at NYU. One of my peers had printed his resume, I handed it to him and asked him where he was applying to. He told me was going to leave his job at Kidder Peabody Merchant Banking Group where he worked in Junk Bonds and was going back to Korea to do sales. I asked if I could apply for his job. He looked at me and saw a smart, hard working person that knew computers and technology and believed I would not let him down or disappoint his ex-employer at KP. He agreed to help me apply. That night I went to the library to find out what was a Junk Bond. I got hired for the part-time job, worked 60+hrs a week, and continued studying full time the last semester at NYU. I automated the work that I did to publish research and began to work as a research analyst. Eventually I landed on the Buy-Side at Kidder Peabody Asset Management.
Q: You joined Penserra in 2012, and you have worked on both sides of Wall Street in a career that has spanned over two decades. Can you expand upon your work experience, and how it has helped you as an institutional fixed income salesperson?
A: Having worked on both sides of the street helped me develop a large network of peers. I understand the mindset and the importance of trust. I like to believe that I work in partnership with my clients to deliver best execution. In the end, the client is the boss and I do everything I can to help him/her out in what he/she wants/needs to do.
Having invested in companies since 1988, owned them and restructured them, plus perform credit analysis, gives me an ability to seize on a situation quickly, understand the risks and assess the upside vs downside through different parts of the credit cycle. Strong credit skills also help me identify potential investment opportunities.
Q: You pursued the sport of rowing during your years growing up in Peru. Now that you’re a busy father of two teenage daughters, what do you do to stay active?
I belong to a gym and religiously try to make it there at least 3 times a week. Ideally one day I will do 2 spin classes back to back, another day I will do a boot camp class and a spin class back to back and another day will do a body conditioning class and a spin class back to back. But since family comes first, I might be able to do only one class or no class and that is fine with me.