Our investment philosophy is based on the premise that superior short fixed income returns over time require active management. Fundamental understanding of the fixed income markets, paired with depth of experience, allow our team to capitalize on opportunities to benefit client portfolios.
We take an unbiased approach to the market utilizing four levers – yield curve positioning, duration management, sector rotation and security selection – as we strive to add value and generate returns. Our ability to apply a unique mix of levers for every portfolio is critical in helping us achieve each client’s objectives through varied market cycles.
Yield curve positioning refers to how we choose to structure the portfolios based on the expected shape of the yield curve. This lever is driven by our macro-economic forecast and Federal Reserve policy. We structure portfolios in bullets, barbells or ladders depending on where we feel relative value can be found.
Duration is the interest rate sensitivity of the portfolio and is primarily driven by client objectives. We adjust this lever long or short to each portfolio’s benchmark duration based on our interest rate outlook.
Sector rotation is the relative exposure to different types of fixed income securities, such as Treasuries, industrial or financial corporate credit and asset-backed securities. The maximum weight in each sector is determined by client investment policies, but the exposure weighting is a lever we manipulate as risk-adjusted relative value in each sector changes.
Security selection is the detailed decision made on which particular investment to purchase for a portfolio. This lever allows us to move from one issuer to another if the fundamentals or trading values are more beneficial to the client.