Investment Objective
The Long Duration Government/Credit Bond strategy seeks to maximize excess returns versus the Bloomberg U.S. Long Govt/Credit Index over the long term.1
Investment Philosophy
PGIM’s Long Duration Government Credit Fixed Income portfolios are managed based on the philosophy that research-driven security selection is the most consistent strategy for adding value to client portfolios. We complement that base strategy with modest sector rotation, duration management, and disciplined trade execution. Risk budgeting is central to our approach.
The Strategy typically generates its excess return from both sector allocation and subsector/security allocation, in fairly equal increments. Duration and yield curve positioning is generally de-emphasized, but will be considered when exceptional market opportunities dictate.
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
