The Firm employs a multi-stage investment process that takes into account the macroeconomic forces driving global and regional economies, along with the bottom-up drivers of individual markets, sectors and securities.
Top-down Macroeconomic Viewpoint
The investment team strongly believes that fixed income investing begins by assessing the most likely near-and long-term global economic outlook, which serves as the overall framework for building a portfolio. From this framework, an assessment of current and projected future yield curve scenarios is developed, providing a key input into the process of assessing asset classes for possible investment, managing rates and portfolio duration through the various themes ultimately employed in its portfolios.
With an emphasis on industries and sectors that typically provide both tax-exempt and taxable credit issuance, the team diversifies its portfolios to support those investing themes that it believes will serve as a major driver of overall performance. Traditional industries and sectors include airlines, diversified finance, energy, healthcare, industrials, power generation, pulp & paper, transportation, utilities and certain asset-backed securitizations, as well as obligations of states, municipalities and territories.
Individual sector and market concentrations are strictly adhered to as part of the overall risk management process within the portfolio, in addition to the concentration limits for individual credits.
The firm's primary risk management focus is managing interest rate and credit risks. This is accomplished in several ways:
- Managing portfolio duration to isolate interest rate risk
- Emphasizing effective credit selection, surveillance and diversification to reduce credit risk
- Actively managing liquid, highly traded securities to reduce both interest rate and credit risks
- Using US Treasury securities to manage duration and improve flexibility in liquidity management
By incorporating an ongoing and active Risk Management approach, the firm ensures that risk is effectively managed as an integral part of the ongoing investment process.
Bottom-up Security Selection