Most bond managers are content to roll maturities in a laddered bond portfolio. This seems to assume that the best day to sell a bond is the day it matures and the best bond to buy is the one at the next rung on the ladder. In contrast, we actively evaluate opportunities to generate extra profits from each individual holding. Our objective is to proactively provide a mix of fixed income securities that offer current income consistency and opportunistic growth potential. We analyze the yield curve, interest rate trends, arbitrage potential and security structure.
Municipal Bond Strategy. Tax-exempt securities are one of the few remaining investment frontiers that offer exceptional rewards for investors willing to investigate value and explore inefficiencies. We construct portfolios around four themes, with the actual mix dependent on client preferences and constraints:
- Short Intermediate. Securities are high credit quality and are comprised of a mixture of callable and non-callable issues.
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Total Return. We examine structure (the cash flow parameters) to find extra return in mostly insured or AAA-rated municipals through an analysis of call provisions,
advance-refunding potential, sinking funds, extraordinary prepayment probabilities, and yield spreads.
- High Yield. Typical securities are non-rated bonds of small community projects (electric generation, water & sewer, etc.) Coupons often are higher and returns generally have less correlation to fluctuations in interest rates.
- Closed-End Municipal Bond Funds. CEF’s are listed on stock exchanges and often trade at substantial discounts to Net Asset Value (NAV). Contrarian profit opportunities can be substantial through a combination of spread normalization, above-average income and NAV appreciation.
Taxable Fixed Income. We are specialists in identifying and exploiting inefficiencies within a high credit quality framework. We shape portfolios around a fixed risk budget, choosing securities based on subtle differences in structural relative value and inefficiencies across the yield curve, using an optimized combination of callable and non-callable issues.
Other investment philosophies include:
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