Strategy Description

The intermediate duration portfolio is structured to provide maximize risk-adjusted total return, solid interest income and preservation of capital in varying economic and market environments. We utilize a collaborative team approach to construct a portfolio of U.S. dollar denominated securities weighted to investment grade corporates in the 3-10 year part of the yield curve.

Strategy Highlights

  • Experienced team
  • Bottom-up credit analysis
  • Relative value focus
  • Sector and industry analysis
  • Strong execution capability
  • Disciplined risk management

Management Process

Our active management approach utilizes macroeconomic analysis in combination with a vigorous fundamental research effort in our search for relative value. These efforts also support our preservation of capital goals by anticipating and minimizing developing risk. We closely monitor term structure dynamics as they react to economic, political, monetary policy and other forces to determine the portfolio’s appropriate duration target. We see our extensive trading and execution experience as complementary to our broader macro and research driven process.

Eligible Securities to include

  • All U.S. Dollar denominated investment grade corporate bonds*
  • Any U.S. Treasuries and Agency obligations
  • Taxable Municipal bonds
  • Yankee and Canadian issues
  • Certain asset-backed securities

*must be index eligible


  • Minimum rating:           Baa3 or BBB
  • Maximum Maturity:      10.5 years
  • Corp Issuer limit:           5% in any one name
  • US Govts limit:                no limit
  • Average rating:                A3/A-
  • Risk Profile:                     Modest risk, low credit and duration volatility
  • Benchmark:                     Barclay’s 5-10 Year  Gov’t/Credit

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 process 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.