Strategy Description

Our Diversified High Income strategy is a taxable multi-asset class approach that attempts to deliver above-average income to the investor. We seek exposures across a myriad of asset classes in order to seek to optimize income generation. Exposures may include a range of products that produce high income or dividends such as Master Limited Partnerships (MLPs), Real Estate Investment Trusts (REITs) and ETFs as well as preferred equity and high income equities. Taking advantage of our experience and our bottom-up research capabilities, we will identify opportunities that generate above-average income while simultaneously managing our risk in a disciplined manner.


  • Experienced team
  • Bottom-up research driven process
  • Product knowledge, industry and sector analysis
  • Strong execution capability
  • Disciplined risk management

Management Process

The Diversified High Income strategy seeks to create a balanced, value-oriented investment portfolio to produce an expected yield of 4%-6%. The strategy is diversified across various income-oriented product groups as well as by industry and sector and has the flexibility to adjust sector and product weightings as market conditions create new relative value opportunities. As in our other investment strategies, we utilize macroeconomic and yield curve analysis to form optimal duration placement. We will emphasize higher quality sectors and securities and seek to minimize volatility during the latter part of the US economic cycle.

Eligible Securities:

  • All securities and products that are publicly traded and US dollar denominated
  • Dividend-paying equity securities and products
  • High income vehicles such as: REITs, MLPs, closed end funds, business development companies
  • Hybrid bonds and products
  • Bank or secured loans that are traded in the secondary market
  • Emerging market debt or equity securities;
  • Preferred stocks
  • Taxable municipal bonds
  • Convertible securities
  • ETFs or ETPs containing securities listed above


  • Estimated current yield from 4% to 6%;
  • No more than 2.5% per individual security;
  • No more than 50% per product type (e.g., MLPs, REITs, Preferred Stock, Bank notes)
  • No more than 15% industry exposure; 20% sector exposure
  • Benchmark: Bloomberg Barclays US Aggregate Bond index

The portfolio construction process involves the implementation of a constrained optimization routine. Our framework enables us to properly manage the risk of the portfolio in a disciplined manner. Our collective experience has taught us that employing a well-structured risk management discipline together with  security selection will lead us to being able to seek to deliver desirable long-term investment performance to our clients.

Portfolio construction is conceptually similar across all of our fixed income strategies. We start with a universe of bonds that meet our security selection criteria. Each bond will possess various attributes that enable us to measure its contribution to the portfolio in terms of risk adjusted expected return. The attributes will also be used to measure investment characteristics relative to our benchmark thus establishing risk constraints. The optimization will then establish a portfolio that simultaneously maximizes risk adjusted expected return and meets our risk constraints.

The framework allows our portfolio managers and our investment committee to perform risk analysis on candidate bonds or to evaluate different interest rate scenarios. This ability is extraordinarily important in active management. It enables our team to measure the effects of active management decisions on portfolio risk prior to implementation and to subsequently monitor risk in a concise manner.

Successful execution is a critical component of our active management process. While we employ various strategies from credit and yield curve analysis to duration management, and a host of other valuation metrics to help drive returns for our clients, what is not fully understood by many investors is the value-added derived from expert securities execution. We believe that every incremental basis point of return is critical, particularly in the current low interest rate environment. It is important to remember that unlike the equity markets, most bonds are not traded on a consolidated exchange with a best bid and offer system. Bond markets function in an over-the-counter, dealer to dealer marketplace. Inexperienced bond investors are often at a disadvantage by not having access to multiple bid and ask prices at the same time. Simply stated, investors are often unaware of the actual spread and mark-ups they are paying.

Our execution capabilities rely upon decades of extensive professional trading experience. Methodologies we employ in an attempt to enhance returns through better execution:

  • We rely on a relative value approach within and across product sectors.
  • We exhibit patience in an attempt to purchase securities on the bid-side of the market
  • We monitor dealer inventories and product flows in order to assess the impact of supply/demand upon spreads and prices.
  • Experience allows us to identify and take advantage of short-term pricing dislocations
  • We will aggregate as feasible odd lot holdings (bought cheaper) into larger positions, in order to exploit the pricing differential between the odd-lot and round-lot markets.
  • We leverage our years of experience and extensive network of dealer relationships to seek to negotiate better prices for our clients.