Government Related
MBS
Corporates
ABS
CMBS
Sovereign
Other
Cash
Less than 1 yr
1-3 yrs
3-5 yrs
5-7 yrs
7-10 yrs
10-20 yrs
More than 20 yrs

Credit Quality Distribution as of 12/31/2015

Treasury
Agency
AAA
AA
A
BBB
< BBB

Portfolio Details as of 12/31/2015

Total Net Assets
$1.34 B
Number of Holdings
404
Average Coupon
3.41%
Average Life
7.71 Years
Effective Duration
5.62 Years

Portfolio Positioning as of 12/31/2015

  • During the quarter, we used the market volatility to invest tactically in sectors with large changes in valuations. Specifically, after spreads tightened early in the period, we de-risked the portfolio by reducing the corporate sector allocation, thereby increasing the underweight relative to the benchmark, the Barclays U.S. Aggregate Bond Index. As spreads widened again in December, we slightly increased the portfolio’s allocation to risk assets. Within investment grade corporates specifically, we maintained the portfolio’s overweight allocation to ‘BBB’-rated corporates, as we believe these firms represent the best risk-adjusted value among investment grade corporate debt at this stage of the credit cycle.
  • We reduced the portfolio’s allocation to asset-backed securities (ABS), although we maintain the portfolio’s large overweight to the sector.  The team continues to uncover attractive risk-adjusted yield in various sectors of the ABS market, and we continue to expect strong opportunities in this growing sector.
  • We continued to maintain the portfolio’s underweight to mortgage-backed securities (MBS) as we believe the sector is sensitive to increasing volatility associated with rising rates. However, we continue to find tactical trading opportunities in favored coupons of Fannie Mae and Freddie Mac-backed securities.  
  • Amidst declining global growth prospects, we continued to lower the portfolio’s non-U.S. exposure.  Most notably, the team continued to lower the portfolio’s exposure to emerging markets corporate debt throughout the quarter, rotating into commercial mortgage-backed securities (CMBS) given its U.S. focus.
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