Our fixed income strategies are grounded in a disciplined process designed to identify and capture risk-adjusted returns across market and economic cycles. By evaluating Realizable Yield, our assessment of the yield that can reasonably be captured after accounting for the risks that may erode Promised Yield, across sectors and securities, we are able to build portfolios that seek consistent outperformance while maintaining a strong focus on risk management. Since our Firm's inception, we have applied a consistent philosophy and process to navigate complex, ever-changing market environments on behalf of our clients.
1
Identify Potential
We evaluate opportunities across the US bond universe, comparing the potential Realizable Yield available in sectors and the securities within them. Our process is built around the principle that it is not the Promised Yield that matters, but the portion of that yield that can ultimately be realized.
2
Return Preservation
We analyze potentially attractive sectors and securities to assess the Realizable Yield. We perform a fundamental review focused on factors that can erode the expected Realizable Yield such as credit quality, cashflow stability, and structural and asset protection.
3
Portfolio Construction
We build diversified portfolios by balancing exposures across government securities, mortgages, structured products, and corporate bonds in pursuit of attractive risk-adjusted returns. Portfolio construction reflects both our relative value views in the market and our commitment to maintaining a portfolio that avoids dependence on any single sector or source of excess return.
4
Manage the Downside
We actively manage risk across multiple dimensions. Credit quality exposure is managed across the rating spectrum relative to the benchmark. A duration and curve neutral approach seeks to limit the effect of directional interest rate movements on benchmark-relative performance, while yield curve mismatches are minimized across key maturities. Our goal is to preserve the portfolio’s sources of potential excess return while managing the unintended risks that could overwhelm them.
Identify Potential
What it is
A structured evaluation of the US bond universe, designed to identify sectors and securities with attractive Realizable Yield profiles.
Why it matters
Traditional bond analysis can place too much emphasis on Promised Yield without fully accounting for the factors that may prevent investors from realizing it. Without a structured framework for identifying potential, portfolios may accept risks for which the Promised Yield provides inadequate compensation.
Impact on portfolios
This first step aligns portfolio decisions with our clients’ investment objectives by focusing on consistent excess returns rather than high Promised Yields that may not be fully realized.
Return Preservation
What it is
A fundamental review of the sectors and securities that are identified as offering potentially attractive Realizable Yield. We vet each opportunity for factors that could increase downside risk or erode our confidence in capturing its anticipated Realizable Yield.
Why it matters
An attractive Promised Yield is not, by itself, sufficient to justify an investment. Fixed income returns are asymmetric; capital can be materially impaired without a consistent, risk-focused process that reviews the fundamentals of each sector and security.
Impact on portfolios
Sectors and securities that offer seemingly attractive yields are excluded from consideration. This discipline seeks to protect portfolio returns from both expected return shortfalls relative to expectations and potential capital erosion.
Portfolio Construction
What it is
A deliberate allocation of capital across multiple fixed income sectors, balancing vetted relative value opportunities with the need for sector and security diversification.
Why it matters
Economic and monetary conditions are always in flux. Deriving returns from a wide range of sectors, rather than relying on a narrowly focused strategy, seeks to reduce dependence on any single source of excess return and support greater consistency over time.
Impact on portfolios
A portfolio diversified across attractive opportunities on a risk-adjusted basis is less dependent on any one sector, security, or market outcome.
Manage the Downside
What it is
A risk management framework focused on controlling the risks that can cause material downside to expected relative returns. The framework focuses excess-return generation on security selection and sector relative value rather than directional forecasts of interest rates, credit spreads, or the yield curve.
Why it matters
Long-run consistency depends as much on the risk-management framework as it does on the process used to identify attractive assets. This focuses excess-return generation on security selection and sector relative value rather than directional forecasts of interest rates, credit spreads, or the yield curve.
Impact on portfolios
The resulting portfolio seeks to preserve exposure to opportunities with attractive Realizable Yield while limiting unintended duration, yield-curve, credit-quality, and concentration risks.