Strategic Income Strategy
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The team believes that markets can be inefficient and by performing rigorous analysis, the team can position portfolios appropriately to add value over time. Bond prices reflect market forecasts for a variety of factors, such as economic growth, inflation, monetary policy, credit risk, and prepayment risk; yet markets tend to be poor forecasters of future events, especially when the implied market forecasts are out of line relative to historic trends. They seek to identify these mispricings and position client portfolios to exploit the value inherent in these opportunities.
The team believes that successful portfolio management depends on four factors:
- Global Perspective
- A Value-Driven Processs
- Diversified Holdings
- Deep Fundamental Research
Unconstrained |
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The team's active approach provides not only flexible asset allocation between the sleeves of fixed income, but also the ability, via bottom-up security selection, to own what they believe are the best bonds in each segment while avoiding the idiosyncratic risks inherent in a passive approach. |
Interest Rate Management |
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There’s a climate change taking place in bonds right now—the three-decade secular decline in interest rates appears to have ended—and it’s time to consider a shift from passive to active strategies. Unconstrained management techniques enable the team to better diversify risks and reduce exposures to movements in interest rates, which tend to be the primary source of return volatility. |
Risk Mitigation |
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A well-balanced portfolio with exposure to a diverse range of fixed income asset classes is an important start, but it’s not enough to ensure uncorrelated returns or appropriate diversification. By managing risk at every stage of the process and paying close attention to the correlations between asset classes, the individuals risks within the portfolio can be blended optimally to decrease the overall risk of the portfolio and ensure no single risk dominates.
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Right-Sized |
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Since the financial crisis, liquidity and inventories have been reduced due to stricter regulations. This restricts the ability for very large funds to hedge risks and limits their investment opportunities. The team believes a portfolio now needs to be “right-sized” to maximize investment-return opportunities. |
| 1 | Macro Analysis: |
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The team seeks to determine what themes are driving asset prices across rates, countries and currencies and to evaluate the investment opportunity set based on a thematic investment thesis. The top-down process uses a combination of fundamental and quantitative analysis to identify and evaluate these investment opportunities. |
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| 2 | Asset Allocation: |
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| 3 | Research: |
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The team's approach to fixed income investing uses a disciplined investment process and a commitment to research. Research is conducted by dedicated teams specializing in a particular niche of the fixed income market. The research teams use in-depth fundamental analysis, complemented by quantitative tools, to generate bottom-up investment ideas and are responsible for security selection. |
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| 4 | Portfolio Construction and Risk Management: |
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Portfolio managers are responsible for implementing the investment strategies. They work to construct each portfolio in a way that conforms to individual client/strategy guidelines and objectives, while staying true to the broad strategy targets that are set by the Asset Allocation team. The portfolio managers achieve these targets by working with the research analysts to fill the sector buckets with bottom-up security selection ideas. The team views risk management as an integral part of their investment process. Based on this belief, portfolios are protected against a variety of risks through diversification, credit risk protection, and liquidity with the goal that no single risk dominates the portfolio. |
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| 5 | Trading: |
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All fixed income trades are executed by centralized Global Fixed Income trading desk. Central dealing segregates the trading function away from the decision making process, and allows the portfolio managers to focus on managing the portfolio. This procedural separation ensures that all accounts are structured according to the parameters established by the team. |
Effective November 1, 2022, Leon Grenyer was added as a Portfolio Manager for this strategy. Effective October 31, 2022, Jim Caron no longer serves as Portfolio Manager. Effective December 1, 2023, Vishal Khanduja was added as Portfolio Manager on the Strategy, and Chris Roth is no longer serving as Portfolio Manager.
Effective 30 August 2024, Richard Ford is no longer serving as Portfolio Manager on the Portfolio.