Investment Objective
Our Core Fixed Income Strategy seeks to maximize excess returns versus the Bloomberg U.S. Aggregate Index over the long term.1
Investment Philosophy
Our Core Fixed Income portfolios can invest in all sectors included in the managed benchmark, or similar broad market fixed income index.
The Strategy is predominantly investment grade focused but, if individual client guidelines permit, also can allocate modestly to non-benchmark high yield bond and emerging markets debt sectors.
- The universe of sectors included in the investment grade portion of the Strategy are index-specific—typically U.S. Treasuries, government agencies, corporate bonds, mortgage-backed securities, CMBS, and asset-backed securities—with the remaining assets dispersed among other ABS, senior secured loans, municipal bonds, non-dollar global bonds, and currencies. .
The Strategy generates excess return over the benchmark primarily from sector allocation and subsector security selection decisions. Duration and yield curve positioning are considered when strong market opportunities dictate, but historically have not been the primary sources of return.
Our portfolios take an actively-managed, relative-value driven approach to security selection.
- We analyze various security relationships in the market in order to exploit temporary market inefficiencies.
- Each trade is intended to capture relative value, with the sum of all security selection expected to contribute a meaningful portion of expected excess return over time.
- The Strategy is expected to perform best in markets with excess spread dislocations that it can capitalize on through relative value trading.
- In contrast, a low volatility interest rate environment with little spread or interest rate movements would most likely lead to more stable security-to-security relationships and, in turn, make it more difficult to outperform.
We believe that diversified portfolios, built through the integration of credit research, quantitative research, and risk management, can achieve consistent excess returns for clients with a high information ratio.
Investment Process
1. Senior investment team assesses global market environment
- Economic Research
- Sector Analysis
2. Senior portfolio managers construct portfolio with sector specialist and analysts
Risk Budget
- Establish risk targets within client's risk budget
- Capture thresholds for systematic and idiosyncratic risks
Asset Allocation
- Determine risk, sector, and term structure positioning
- Incorporate themes given current market dynamics
Security Selection
- Sector specialists and research analysts aligned by industry determine individual securities
- Research-based approach
3. Senior portfolio managers and risk manager oversee risk positions
