Fixed Income Investing 

Fixed Income

We invest in fixed income securities primarily to reduce volatility and to add income. Because of the low correlation between fixed income and equity returns, income securities will add a degree of stability to any stock portfolio. We focus on investment grade corporate debt, preferred securities, U.S. agencies, U.S. treasuries, and municipal bonds when appropriate.

We apply a top-down investment approach when looking at fixed income securities. We start by determining whether taxable or tax-exempt bonds should be purchased. Once this decision is made, we make a disciplined examination of macroeconomic policy and economic statistics in order to determine our interest rate and yield curve expectations. At this point we examine the relative value across security types and industry sectors. We then use our expectations to make security, duration and sector decisions. Lastly, we focus on individual issues by examining liquidity, credit quality, yields, and yield-spreads.

Each fixed income portfolio is diversified across multiple sectors in order to reduce risk. Portfolio durations are kept within a reasonable range relative to the specified index. We emphasize sector and security selection.