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 06/30/2015

Treasury
Agency
AAA
AA
A
BBB
< BBB

Portfolio Details as of 06/30/2015

Total Net Assets
$1.31 B
Number of Holdings
423
Average Coupon
3.32%
Average Life
7.53 Years
Effective Duration
5.62 Years

Portfolio Positioning as of 06/30/2015

  • During the quarter, we reduced the investment grade portion of the corporate sector allocation and are consequently underweight the Barclays U.S. Aggregate Bond Index.  We believe many firms are funding equity buy-backs with increased amounts of debt and, therefore, have focused on firms that do not have the propensity to increase leverage and risk their investment grade credit rating.  Thus, our preference for ‘BBB’ rated securities remains intact.
  • We maintained the relative underweight to mortgage-backed securities (MBS) during the quarter relative to the benchmark, given the increase in prepayment volatility accompanying the heightened interest-rate volatility.  Within agency MBS, we maintain the portfolio’s underweight to Ginnie Maes, currently finding better value in Fannie Mae and Freddie Mac-backed securities.  
  • We increased the strategy’s overweight in asset-backed securities (ABS), consistent with the up-in-quality bias at the portfolio level.  The team has found attractive yield in various sectors of the ABS market, primarily ‘AAA’, and modestly increased the portfolio’s exposure to below ‘AAA’-rated securities.
  • As expectations for near-term volatility amid interest-rate hike speculation continued, we modestly lowered the portfolio’s aggregate risk exposure.  Most notably, the team continued to lower the portfolio’s exposure to emerging markets corporate debt throughout the quarter, as the sector has outperformed other segments of the fixed income market and the team believes the sector will likely increase in volatility in coming quarters.
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