Government Related
Investment Grade Corporate
ABS
MBS
High Yield Corporate
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
Not Rated

Portfolio Details as of 12/31/2015

Total Net Assets
$2.42 B
Number of Holdings
556
Average Coupon
3.90%
Average Life
7.83 Years
Effective Duration
5.24 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. Universal 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.
  • Overall, we increased the portfolio’s high yield corporate credit allocation. After initially reducing the portfolio’s exposure, we increased the high yield allocation as spreads widened and valuations became more attractive in November and December.
  • 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.  
  • We reduced the strategy’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.  Amidst lower global growth prospects, we continued to find value in commercial mortgage-backed securities (CMBS) given their U.S. focus. 
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