Fixed Income

country club trust

The bulk of our fixed income portfolios are generally invested in investment grade bonds. However, we may choose to supplement a client's bond portfolio with select bond mutual funds or ETFs for non-investment grade fixed income exposure to enhance return. As a rule, bond portfolio turnover is relatively low, and major structural changes to the portfolio are made over time. The structure of a portfolio is adjusted using primarily cash from interest payments, maturities and calls, and occasionally from the sale of bonds. The basic backbone of our fixed income process is a laddered approach. A ladder spreads the fixed income portfolio over a series of years and provides diversification of credit, coupon, and maturity. In addition, it provides a predictable income stream for distribution or reinvestment.

Beyond the basic ladder, we seek to enhance fixed income returns by considering:

  • Duration shifts — Shorten or lengthen the portfolio's weighted average duration or maturity depending on our team's outlook for interest rates.
  • Security selection — Exploit situations where individual bonds may be mispriced.
  • Sector allocation shifts — Shift the relative weight of various types of fixed income securities in the portfolio depending on our team's assessment of relative value across sectors of the fixed income market.
  • Yield curve positioning — Emphasis on one maturity over another based on our team's expectations for the future shape of the yield curve.
  • Call option risk — Selectively purchase callable bonds to enhance return.
Some information provided may be obtained from outside sources believed to be reliable, but no representation is made as to its accuracy or completeness. Documents on this web site are intended for discussion purposes only and should not be considered a recommendation. Please note that investments involve risk, and that past performance does not guarantee future results.