Taxable Fixed Income –
Intermediate and Core

Process

Many factors must be considered when building an optimal portfolio. Our fixed income team uses the macroeconomic landscape, relative value between sectors, and issue level risk/reward analysis as inputs to make portfolio decisions such as portfolio duration, sector contribution to duration, yield curve positioning and structure exposure.

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Experienced Portfolio Management Team

Portfolio managers average 17 years of investment management experience

Performance Incentive Plan
Aligns managers’ and clients’ interests to reward long-term performance

Michael J. Wachter, CFA

Michael J. Wachter, CFA
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Douglas J. Fry, CFA

Douglas J. Fry, CFA
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Katherine M. Doyle

Katherine M. Doyle
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Peter G. Altobelli, CFA

Peter G. Altobelli, CFA
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William F. Ford, CFA

William F. Ford, CFA
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Adam J. Lynch

Adam J. Lynch
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Sarah L. Thompson, CFA

Sarah L. Thompson, CFA
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Evaluating the Macroeconomic Landscape

macroeconomic-landscape

Expectations of changes in the macroeconomic environment are the prime determinant of interest rates, credit spreads, structure spreads and yield curve shape. Our fixed income team is constantly evaluating trends in GDP growth, employment, inflation, manufacturing, consumer income and spending, and other economic data to position our portfolios to take advantage of these trends.

Sector Relative Value

A key component to a portfolio’s total return is the duration and weighting of each sector relative to the index. Determining relative value between sectors allows us to adjust sector contributions to duration in different market environments to maximize total return potential.

sector-relative-value

Credit Risk Evaluation - Methodology

The first step in assessing the value of company’s debt offerings is to objectively determine the amount of risk represented by that offering. We employ a three layered approach to credit risk assessment and management.

Three Layered Approach

  • Credit Ratings: Our holdings are concentrated in securities rated A to AAA by at least one rating agency. Though the major rating agencies have not proven themselves to be a completely reliable source of forward looking assessments of risk, their ratings matter and must be considered.
  • Flag Scores: We maintain a database that tracks bond, equity and CDS prices. We use sudden or significant changes in these to alert us that the market perceives a significant change in credit risk.
  • Internal Credit Analyst Research: Our credit research team develops credit risk assessments of our investable credits and constantly monitors developments that alter the risk profile of these credits.

Internal Credit Research Approach

  • Identify Potential Causes of Financial Distress: Using company filings/statements, sell-side research, news articles as well as industry and economic data, we develop an understanding of industry risks that may cause cash flows to be insufficient to service debt or the value of assets to be insufficient to support liabilities.
  • Determine Level of Exposure: Once we understand the potential causes of financial distress, we then determine how much of a negative outcome would be needed to actually cause financial distress for a given credit.
  • Assess Likelihood of Sufficiently Negative Outcome: After establishing levels of exposure, we estimate the likelihood of different severities of negative outcomes and use this to develop an overall likelihood of financial distress.

Credit Risk/Reward Assessment

credit-risk-reward-assessment

To be considered for our clients’ portfolios, a security must offer returns sufficient to compensate for any incremental credit risk relative to other investment options. To make this determination, we compare our risk assessment with the reward (spread) being offered in the market. A credit will be included in the portfolio if this assessment shows a favorable risk/reward balance.