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Short Duration Credit

The strategy seeks to deliver high risk-adjusted returns with limited interest rate sensitivity through a flexible, multi-sector bond approach. 

Summary

Summary

HIGHLIGHTS

  • Managed by a deep and experienced team
  • Investment process combines top down macro views with bottom-up security selection
  • Focused on identifying relative value opportunities through quantitative analysis and fundamental research
  • Collaborative portfolio construction leverages collective firm-wide insights
  • Rigorous, multi-dimensional risk management is an integral part of the process

Key Facts as of 07/31/2019

Strategy Inception Date
Dec 2007
Strategy AUM
$57.1 B
Benchmark
ICE BofAML 1-3 Year U.S. Corporate Index
eVestment Universe
US Short Duration Fixed Income

PORTFOLIO PARAMETERS

  • A flexible approach emphasizing short maturity credit sectors that have historically outperformed government-related securities.

  • A true short maturity strategy that has historically maintained an effective duration of approximately 2 years and a spread duration of approximately 2-3 years1

  • Investment universe typically includes short maturity investment grade corporate debt, CMBS, high yield corporate debt, ABS, U.S. Treasuries, agencies and U.S.-dollar denominated bonds of non-U.S. issuers.

  • 35% maximum allocation to below investment grade securities.2 Allocation to below investment grade has generally ranged between 10-20%1

  • Maximum of 25% in any one industry3

Vehicles

  • This strategy is available as a:
  • Separate Account
  • ERISA CIT
  • Commingled Trust
  • Mutual Fund
  • Series Fund
  • UCITS

PORTFOLIO MANAGERS

Andrew H. O'Brien
Andrew H. O'Brien, CFA

Partner & Portfolio Manager

21 Years of Industry Experience

Kewjin Yuoh
Kewjin Yuoh

Partner & Portfolio Manager

25 Years of Industry Experience

Steven F. Rocco
Steven F. Rocco, CFA

Partner & Director of Taxable Fixed Income

18 Years of Industry Experience

Supported By 66 Investment Professionals with 15 Years Avg. Industry Experience

SHORT CREDIT INSIGHTS

Short-Term Bonds: A History of Opportunity

Portfolios of short maturity bonds historically have had greater risk-adjusted returns than portfolios with greater term risk. What are the implications for investment portfolios?

The Limits of Duration Risk: An Argument for Diversification in Fixed Income

Many traditional risk premiums are compressed, and investors likely will need diversifiers beyond duration and equity beta to achieve their risk and return goals.

The Appeal of Short Duration Credit in Strategic Cash Management

Yields more than compensate cash managers for taking on minimal credit risk.

How Active Management Can Make a Difference in Short Duration Credit

The potential benefits of a thoughtfully designed strategic focus on short credit are documented here for a variety of portfolio applications in the institutional space.

Portfolio

Portfolio

Portfolio Breakdownas of 07/31/2019

Type Portfolio
Type Portfolio
Investment Grade Corporate
ABS
CMBS
High Yield Corporate
Bank Loans
U.S. Government Related
Sovereign
MBS
Other
Cash

Allocations are reported as of the date a security transaction is initiated; however, certain transactions may not settle until several days later. Accordingly, cash may appear as a negative allocation as a result of forward-settling instruments such as currency forwards, certain mortgage-backed securities, and U.S. treasury futures. "Other" may include municipal bonds and non-index holdings. 

 

Credit Quality Distributionas of 07/31/2019

Type Portfolio
U.S. Treasury 3.0%
Agency 3.2%
AAA 37.0%
AA 7.4%
A 7.8%
BBB 29.3%
<BBB 11.5%
Not Rated 0.8%

Ratings (other than U.S. Treasury securities or securities issued or backed by U.S. agencies) provided by Standard & Poor's, Moody's, and Fitch. For certain securities that are not rated by any of these three agencies, credit ratings from other agencies may be used. Where the rating agencies rate a security differently, Lord Abbett uses the average rating based on numeric values assigned to each rating. Breakdown is not an S&P credit rating or an opinion of S&P as to the creditworthiness of such portfolio. 

CHARACTERISTICS as of 07/31/2019

Portfolio Index
Portfolio Index
Number of Issues 1774 1683
Average Coupon 3.86% 3.41%
Average Life 2.39 Years 2.01 Years
Average Effective Duration 1.80 Years 1.87 Years
Average Yield to Worst 3.00% 2.52%

Portfolio data is based on the Short Duration Credit Representative Portfolio.

Performance

Performance

Short Duration Credit Institutional Composite

Average Annual Returns as of 06/30/2019

YTD 1-YR 3-YR 5-YR 10-YR Since Inception
Gross of Fees 4.17% 5.53% 3.42% 2.90% 4.40% 4.68%
Net of Fees 4.07% 5.32% 3.21% 2.68% 4.16% 4.44%
ICE BofAML 1-3 Year U.S. Corporate Index 3.47% 5.06% 2.37% 2.08% 3.00% 3.09%

Inception Date: January 1, 2008

Returns for periods of less than one year are not annualized.

Calendar Year Returnsas of 06/30/2019

2018 2017 2016 2015 2014 2013 2012 2011 2010 2009
Gross of Fees 1.84% 2.91% 4.64% 1.03% 2.33% 2.23% 7.25% 3.77% 7.10% 17.86%
Net of Fees 1.64% 2.70% 4.39% 0.79% 2.08% 1.99% 7.00% 3.53% 6.84% 17.58%
ICE BofAML 1-3 Year U.S. Corporate Index 1.62% 1.91% 2.39% 1.01% 1.19% 1.78% 4.49% 1.76% 4.86% 14.69%

1Portfolio data is based on the Short Duration Credit Representative Portfolio
2Measured at time of purchase.
3Does not apply to mortgage-backed securities or U.S. Government and Agency securities. 

 

Performance data quoted reflect past performance and are no guarantee of future results. Current performance may be higher or lower than the performance quoted.

Net of fees performance reflects the deduction of the highest applicable management fee ("Model Net Fee") that would be charged based on the fee schedule appropriate to you for this mandate without the benefit of breakpoints. Please be advised that the composite may include other investment products that are subject to management fees that are inapplicable to you but are in excess of the Model Net Fee. Therefore, the actual performance of all the portfolios in the composite on a net-of-fees basis will be different, and may be lower, than the Model Net Fee performance. However, such Model Net Fee performance is intended to provide the most appropriate example of the impact management fees would have by applying management fees relevant to you to the gross performance of the composite. 

 

Source Merrill Lynch, Pierce, Fenner & Smith Incorporated ("BofAML"), used with permission. BofAML PERMITS USE OF THE BofAML INDICES AND RELATED DATA ON AN "AS IS" BASIS, MAKES NO WARRANTIES REGARDING SAME, DOES NOT GUARANTEE THE SUITABILITY, QUALITY, ACCURACY, TIMELINESS, AND/OR COMPLETENESS OF THE BofAML INDICES OR ANY DATA INCLUDED IN, RELATED TO, OR DERIVED THEREFROM, ASSUMES NO LIABILITY IN CONNECTION WITH THE USE OF THE FOREGOING, AND DOES NOT SPONSOR, ENDORSE, OR RECOMMEND LORD ABBETT, OR ANY OF ITS PRODUCTS OR SERVICES.

 

The information provided is supplemental to the strategy’s Institutional Composite presentation, which can be accessed via the below link, and is subject to change.

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