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PROCESS
Screening and Analysis
We screen the investment grade universe for corporate bonds, taxable municipal bonds, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities that meet our standards. We also conduct labor-friendly screening and socially responsible screening of securities as well. In our security analysis, corporate bonds are subjected to a fundamental analysis of financial statements and an in-depth proprietary analysis. We also conduct a valuation of the entire capital structure for corporate bonds, as well as a credit review in our weekly research meetings. Structured securities are subjected to model cash flows and stress-test prepayment assumptions under multiple scenarios.
Security Selection
Our Intermediate Fixed Income strategy security selection includes:
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• Higher current yield than benchmark
• Shorter maturities
• Stable fundamentals
• Long holding period
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10-30% Expected Ratings Upgrades
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• Rapidly improving fundamentals
• Identifiable catalysts
• Intermediate holding period
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• Special situations
• Industry consolidations
• Intermediate holding period
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• Mispriced security
• Liquidity imbalance
• Short holding period
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Acquisition and Disposition
The relative value analysis for the Intermediate Fixed Income strategy is based on our proprietary spread data, and a robust fixed income analytic infrastructure. Our investment committee oversees the portfolio strategy, and reviews portfolio structure. The portfolio manager makes the final decision for security acquisition.
The portfolio’s strict sell discipline includes if the risk/return on a security becomes unfavorable; if an attractive swap candidate emerges; if an analyst uncovers deteriorating credit fundamentals; if portfolio rebalancing is required; or based on client specific needs.
Investment Guidelines
• Minimum quality: Baa3 or BBB- for individual securities
• Minimum weighted average quality: BBB
• Maximum single issuer exposure: 5%
• Maximum industry limit: 15%
• Maximum high yield exposure: 20%
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