Investment Objective
The Core Plus Fixed Income Strategy seeks to maximize excess returns versus the Bloomberg U.S. Aggregate Index over the long term.1
Investment Philosophy
Core Plus Fixed Income portfolios can invest in all sectors included in the benchmark, or similar broad market fixed income index.
The Strategy opportunistically allocates to non-benchmark sectors as market conditions warrant and individual client investment guidelines permit. Non-benchmark asset allocations can potentially be of investment grade and non-investment grade quality.
- 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 “Plus” sectors of the Strategy may include high yield bonds, senior secured loans, emerging markets debt, foreign currency denominated bonds, currencies, and preferred securities. Depending on client guidelines, there may be limits imposed on certain non-benchmark sectors.
This strategy emphasizes spread product in the sector allocation process and therefore may hold larger-than-benchmark allocations to corporate bonds, structured product, high yield bonds, and emerging markets debt.
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.
Our philosophy is 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
