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.