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Our approach to fixed income investing focuses on maximizing interest income while minimizing risk to principal.
- Because each portfolio is handled separately, we can customize both portfolio and reporting to meet client requirements, such as cash flow needs, tax efficiency and income requirements.
- We build taxable fixed income portfolios around a core of high quality municipal bonds with an underlying rating of "A" or better. General obligation and essential services bonds comprise a majority of our investments. We favor higher coupon premium bonds with longer stated maturities priced to a shorter call date. Bonds with these characteristics have less sensitivity to interest rates than par or discount bonds, providing stability during periods of rising interest rates. This "cushion" structure is a niche segment of the municipal bond market that is inefficient and often generates yields that are superior to par bonds offered in the new issue market.
- For tax-exempt portfolios (e.g., IRA's, foundations and pension plans), we invest in U.S. Treasuries, mortgage-backed securities, individual bonds issued by government agencies, municipalities (taxable municipal bonds) and corporate bonds. We may also utilize bond funds (open-end, closed-end and exchange-traded) for liquid, diversified exposure to specific sectors of the fixed income market. The structure of any particular portfolio is dependent upon market conditions and a client's investment objectives. Changes in duration and sector rotation are generally made gradually.
- Our experience has shown that these portfolio structures outperforms in periods of stable or rising interest rates. We believe this conservative approach combines above-average returns with low risk exposure over time.
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