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PGIM Fixed Income’s Core Conservative Strategy is a benchmark-focused, risk-controlled, investment grade Core strategy that seeks +25 bps excess return over the Barclay’s Aggregate Index over a market cycle with index-like risk.1,2
We manage the Core Conservative Strategy as a lower-risk, lower tracking error alternative to other Core Strategies. Our philosophy is to construct highly diversified, benchmark-focused portfolios and implement risk exposures in areas where we have demonstrable expertise, such as research-based subsector and security selection, while constraining top-down exposures such as duration, yield curve, and sector allocation closely to the benchmark. Indeed, our Strategy seeks and generates virtually all of its excess return from just two activities: bottom-up subsector rotation within the corporate and mortgage/structured product sectors, and research-based security selection in all sectors. We believe that intensive, bottom-up fundamental credit research on both industries and securities, coupled with experienced relative value analysis, can effectively identify undervalued yet creditworthy subsectors and securities regardless of environment or market cycle. We regard these as high information ratio, lower risk activities that can consistently generate alpha across markets.
PGIM Fixed Income employs a disciplined, three-step investment process to manage Core Conservative Portfolios:
1 There is no guarantee that these objectives will be met.
2 On average, over a full market cycle defined as three to five years.
No risk management technique can guarantee the mitigation of elimination of risk in any market environment.
Source: PGIM Fixed Income as of December 31, 2020.