We are often approached by Endowments and Retirement Plans to assist in the management of their fixed income assets. Many times these entities do not have an Investment Policy and in some cases no policy at all. The creation and development of an Investment Policy Statement is an essential part of the fiduciary responsibilities of plan trustees and provides a framework by which investment decisions are made. We work with those entities that do not have an Investment Policy in developing a policy that meets the needs of their organization. In addition to Endowments and Retirement Plans, we also encourage our individual clients to work with us in developing a personal Investment Policy Statement in order set clearer goals and parameters for their portfolios.

Our main focus in the management of our fixed income portfolios is capital preservation. Accordingly, our portfolios are constructed using high quality fixed income securities. When selecting securities for possible inclusion in a portfolio, our process does not simply rely on the ratings assigned by the ratings agencies. In addition, fundamental research analysis is performed to gain an understanding of the overall financial health of an issuer. Once we have determined that an issuer’s financial health is solid, only then does it become a viable candidate for inclusion in the construction of a portfolio. With regard to municipal securities, our purchases are typically limited to General Obligations (State Level and Major Cities), essential revenue or pre-refunded debt.

As previously stated, our emphasis in the fixed income market is on high quality securities. However, even the highest quality issuers can experience an unexpected disaster (oil spill, natural disaster, etc.) which can temporarily (or sometimes permanently) impact the value of their fixed income securities. As such, our portfolios are constructed with an emphasis on diversification so that no single issuer represents a significant portion of the overall portfolio. In addition, we closely monitor exposure to sectors so that a portfolio is not overly exposed to a single sector. When purchasing securities we typically select large global issues that are well quoted and traded by multiple dealers. This ensures accurate pricing, liquidity, and facilitates efficient trade execution.

The question of whether to invest in taxable or tax-exempt securities is not always a simple question to answer. A client’s current tax bracket as well as projected tax bracket are important factors to consider. In addition, yields in both the taxable and tax-exempt fixed income markets will impact this important decision. We work with our clients in formulating a strategy that provides for the best after tax yield. Markets change, so often clients may benefit from having taxable securities at one point in time while tax exempts at another. Our constant monitoring of the market levels ensures clients are investing in the correct markets at a given point.

The fixed income market is a negotiated market. Unlike a stock exchange, where stocks often trade in a relatively tight range, bonds often trade at levels that can be significantly higher or lower than trades in the same security at virtually the same time. Bond prices can be impacted by such factors as the credit rating, the size of the issue, block size, issuer specific news, etc. As such, trade execution is critical to the overall performance of a portfolio. Having a complete understanding of the market and where various issues are currently trading is essential to managing a portfolio. Our fixed income head is focused exclusively on the bond market and continuously monitors the markets looking for opportunities in mispriced fixed income securities.

Providing timely and accurate performance reporting is essential to the evaluation of a portfolio. Our reporting platform is recognized in the fixed income industry as a leader in performance reporting. Our financial and accounting background allows us to efficiently analyze the performance data in order to make timely and strategic portfolio changes when necessary. Our portfolio review process includes client reviews (meetings or calls) on a quarterly, semi-annual or annual basis depending on the needs of the client or organization.