We believe in a disciplined, value-driven approach to fixed income investment management. Central to our approach is bottom-up, fundamental analysis, which we use to identify sectors and securities that we believe are priced inefficiently. Our Inflation Managed Bond strategy may be a solution for fixed income investors, who are concerned about rising inflation and want to achieve inflation protection without the large exposure to real yields that accompanies most TIPS funds.
Our approach is predicated upon the following:
- The Inflation Managed Bond strategy combines short to intermediate taxable fixed income securities with Consumer Price Index (CPI) swaps.
- Inflation protection on the nominal high grade bond portfolio is supplied through CPI (inflation) swaps. The swaps are generally duration matched to the portfolio of fixed income credit securities. The CPI swap ratio to fixed income securities will vary with the inflation outlook.
- The strategy manages bond duration actively throughout the inflation cycle — initially at intermediate index levels, but we can shorten or lengthen overall portfolio duration as interest rates rise or fall either as a result of inflation/deflation or changing real rates.
- The strategy attempts to provide investors with a higher yielding and shorter duration alternative to TIPS strategies while seeking to provide returns that are more closely correlated to actual inflation.