Investment Process
We believe that superior investment returns may be achieved through active management of high-quality securities. Our Short-Term Strategy portfolios are separately managed to conform to each client’s unique investment objectives, liquidity needs, risk constraints, and tax-efficiency requirements. Fundamental research, computer modeling, and rigorous scenario analysis are key components of our Short-Term Strategies.

Our three strategies are designed to preserve principal, maintain liquidity, enhance total return, and minimize risk, and involve:

Yield-curve positioning: Portfolio structure is altered based on the current and anticipated shape of the yield curve. Bullet, barbell, or laddered structures are used to maximize yield and alter duration distribution. Duration is adjusted moderately relative to the benchmark.

Sector rotation: Sectors are underweighted or overweighted based on our outlook for the economy, the markets, and interest rates.

Security selection: Securities are selected to maximize risk-adjusted returns through research-driven analysis and issuer diversification.

Portfolio Construction
In constructing the portfolio, our Short-Term Strategies team begins with the client’s objectives and risk constraints along with an outlook for all financial markets from our Investment Committee. From there, the team looks to the Fixed Income Committee for decisions regarding yield curve positioning, sector rotation, and security selection. Our team then incorporates research, implements investment strategies and selects the individual securities for the portfolios.

Our research process incorporates:

Proprietary and contractual credit research

“Street” research

State-of-the-art analytical systems:

Salomon Yield Book

Lehman PC tools

Bloomberg analytics

roprietary systems, including performance attribution, Parsec, and Credit Databases

RiskMetrics historical volatility and correlation measures

Charles River Trading System

Risk Management
Our goal with Short-Term Strategy portfolios is to maximize returns and preserve principal through superior risk control. For each portfolio we manage, we initially establish client objectives and risk tolerance and then regularly measure tracking error against client benchmarks. We minimize risk and manage variability of returns through rigorous credit analysis, diversification, and moderate duration management.