Core Plus Bond Management
A disciplined, consistent approach to adding value from multiple alpha sources across market environments by investing in investment-grade securities
- Investment insights applied through a risk-controlled framework
- Portfolio constructed to achieve maximum information ratio; many small “bets” with an emphasis on monitoring tail risk
Market Risk: The risk of a change in the value of a position as a result of underlying market factors, including among other things, the overall performance of companies and the market perception of the global economy.
Liquidity Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Credit Risk: The risk that bond issuers may fail to meet their interest repayments, or repay debt, resulting in temporary or permanent losses to the portfolio.
Interest Rate Risk: The risk of interest rate movements affecting the value of fixed-rate bonds.
Derivatives Risk: The strategy may use certain types of financial derivative instruments (including certain complex instruments). This may increase the portfolio’s leverage significantly which may cause large variations in the value of investments. Investors should note that the strategy may achieve its investment objective by investing principally in Financial Derivative Instruments (FDI). There are certain investment risks that apply in relation to the use of FDI.
Emerging Markets Risk: Emerging markets are likely to bear higher risk due to a possible lack of adequate financial, legal, social, political and economic structures, protection and stability as well as uncertain tax positions which may lead to lower liquidity. The value of a portfolio may experience medium to high volatility due to lower liquidity and the availability of reliable information, as well as due to the strategy's investment policies or portfolio management techniques.
Counterparty Risk: The risk that the portfolio may be unable to sell an investment readily at its fair market value.
Operational Risk: The risk of direct or indirect loss resulting from inadequate or failed processes, people and systems including those relating to the safekeeping of assets or from external events.
Currency Risk: Investments in a currency other than the base currency of the portfolio are exposed to currency risk. Fluctuations in exchange rates may affect the return on investment. If the currency of the portfolio is different from your local currency, then you should be aware that due to exchange rate fluctuations the performance may increase or decrease if converted into your local currency.
Three questions drive our investing framework, enabling us to exploit mispricing opportunities with conviction
- What is the market's expectation? Market's risk/reward tradeoff as expressed in asset's price
- Where do we have investment insight? Our differentiated view and the implications for the asset's price
- How confident are we on our views? Our conviction level
1. Sector Research and Valuation
We use insights gained from proprietary fundamental and quantitative research to uncover, analyze and seek to capitalize on market opportunities. State-space analysis is an essential tool as part of our disciplined and repeatable approach to generating consistent risk-adjusted returns.
2. Portfolio Strategy and Risk Budgeting
Internally generated expected return forecasts of asset classes lead directly to developing strategy and risk budgets.
3. Issue Selection
Proprietary analytical tools complement our ability to identify, select and monitor portfolio positions.
4. Risk Management
Risk control is fully integrated in every step of our investment process. We utilize a proprietary risk management framework to continuously monitor overall portfolio risk.
5. Portfolio Construction
Our portfolio seeks to achieve maximum information ratio.
Adaptive to Market Environments
Our strategy has provided diversified and dynamic exposure across the fixed income market.
Asset Allocation Historical Perspective
- TIPS: Selectively held when the sector offers attractive relative value versus nominal treasuries
- High Yield and Emerging Market Debt:
- High Yield: Potentially increase income and improved risk-adjusted returns, allocations driven by our investment views reflecting potential return and estimated volatility
- Emerging Market Debt: Global diversification with varying exposure between hard currency, local currency and credit
- ABS/CMBS: Emphasis on Commercial Mortgage Backed Securities
- Mortgages: Agency MBS typically offers attractive risk-adjusted returns
- Corporates: Fundamental credit view leads to sub-sector allocation adjustments and beta modification (effective tail risk management → consistent market cycle returns)
- Agencies: Selectively held when the sector offers attractive relative value versus Treasuries
- Treasuries: Emphasis on duration and yield curve positioning to ensure entire portfolio structured to reflect investment view
- Cash: Held to manage duration, provide liquidity and reflect overall positioning MBS TBAs (forward exposure to Agency MBS)