Long-term default rates in double B credits are slightly below 1%, he notes, whereas single Bs are above 4%. Frisch argues that compressed spread levels and the stage of the market cycle mean investors are not being compensated for the additional risks between these bands. At just 200bp, the spread distribution in 2020 is very different to early 2019, when investors could earn 350bp extra in B names over double Bs. Moreover, double B credits tend to be big, publicly funded companies that took advantage of low funding rates to delever. But many single B names are LBOs with higher leverage, weaker credit protections and smaller and less liquid bonds. These tend to be behind stated deleveraging plans, says Frisch, especially in bonds issued from 2017 to 2019. Axiom plans to mitigate negative carry by finding ways to lower costs and identify specific risk projects. This could be through accessing US and European double B primary market issues to increase positive carry, as well as picking the cheapest single B instruments to short across bonds, CDS and total return swaps. Axiom will also add specific carry-positive strategies, such as going long US high yield energy hedged by TRS and long a basket of financial services names hedged by the iTraxx Sub Financials index.