Investment Grade Corporate
CMBS
ABS
High Yield Corporate
Bank Loans
MBS
U.S. Government Related
Sovereign
Other
Cash
Less than 1 year
1-2.99 years
3-4.99 years
5-6.99 years
7-9.99 years

Credit Quality Distribution as of 03/31/2016

U.S. Treasury
Agency
AAA
AA
A
BBB
<BBB
Not Rated

Portfolio Details as of 03/31/2016

Total Net Assets
$593.54 M
Number of Issues
991
Average Coupon
4.37%
Average Life
2.5 Years
Average Effective Duration
1.97 Years

Portfolio Positioning as of 03/31/2016

  • 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. CPI swaps detracted from portfolio performance, as inflation expectations decelerated during the first quarter.
  • The portfolio maintains its diversified exposure to various credit-sensitive sectors of the market.  Consistent with the past several years, the portfolio maintained only minor exposures to U.S. Treasury and agency securities over the quarter, primarily holding positions in these sectors for liquidity-management purposes.
  • Although we broadly maintained the portfolio’s up-in-quality bias, we believe the heightened levels of volatility provided opportunities to invest tactically during the period. Generally, we emphasized risk sectors early in the period, when spreads widened significantly, then de-risked the portfolio in the second half of first quarter 2016, as spreads tightened and valuations became less attractive.
  • As spreads widened through the first half of the period, we increased the portfolio’s allocation to credit-sensitive sectors, particularly investment grade corporates. As risk assets rallied in late February and March, we reduced this allocation to realize profits. We continue to favor ‘BBB’ rated corporate debt, as we believe this portion of the corporate sector continues to provide attractive risk-adjusted value.  
  • We maintained the portfolio’s overweight allocation to asset-backed securities (ABS).  We continue to uncover attractive risk-adjusted yield in various sectors of the ABS market and use the sector as a source of liquidity.
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