Investment Grade Corporate
CMBS
High Yield Corporate
ABS
MBS
Government Related
Sovereign
Other
Cash
Less than 1 yr
1-3 yrs
3-5 yrs
5-7 yrs
7-10 yrs

Credit Quality Distribution as of 01/30/2015

Treasury
Agency
AAA
AA
A
BBB
< BBB
Not Rated

Portfolio Details as of 01/30/2015

Total Net Assets
$781.37 M
Number of Holdings
913
Average Coupon
4.32%
Average Life
2.59 Years
Effective Duration
1.76 Years

Portfolio Positioning as of 12/31/2014

  • The portfolio combines a short-term bond strategy with an overlay of Consumer Price Index (CPI) swaps in order to hedge against inflation over a full market cycle. In the fourth quarter, the CPI swaps had a negative impact on portfolio performance, as inflation expectations trended lower.
  • Consistent with the portfolio’s strategic design, we maintained minor exposures to Treasuries and agency securities over the quarter, instead seeking to find relative value opportunities within more credit-sensitive sectors of the market.  Further, we added to those credit-sensitive sectors during the quarter as spreads widened, slightly increasing the portfolio’s overall level of risk.
  • Within the portfolio’s corporate bond allocation, we increased the portfolio’s exposure to investment-grade bonds, while reducing its position in non-investment-grade corporates.
  • The portfolio’s significant allocation to commercial mortgage-backed securities (CMBS) was mostly stable over the quarter, and we maintain our positive outlook for the commercial real estate sector.
  • We maintained the portfolio’s significant position in asset-backed securities (ABS) throughout the fourth quarter. Within the sector, we continue to find value in the liquidity offered by ‘AAA’ rated securities backed by auto loans and, to a lesser extent, securities backed by credit card receivables.  In addition, we continue to find value in the additional yield offered by ‘AAA’ rated collateralized loan obligations (CLO).
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