Portfolio Philosophies

Rigorous Dedication to Economic Research

Successful investing is accomplished only with discipline and a rigorous dedication to independent investment and economic research. We are dedicated to the discipline of capital markets analysis even in a volatile market.

Our disciplines, policies and practices are continually evolving. Our market philosophy incorporates new analytical methodologies and adapts to ever-changing economic realities. As with all investments, returns are historical and past performance is no guarantee of future results.

Our commitment to Total Return rather than Yield Seeking or Option Adjusted Spread buying practices is central to our performance, and successful investing. Observing economic trends over the years gives us the judgment to balance of ratios of instruments within the aggregated portfolio.

Risks vs. Reward Overview

As portfolio managers sought returns beyond the norm over the last four decades, new structures, paradigms, and products such as CMOs, CDOs, ABSs, mezzanine debt, range notes, and non-inversion notes have entered the fixed income marketplace. These structured derivative products have required a very sophisticated analysis of possible scenarios and mean probabilities plus a supportive status quo.

Successful investing also requires an advanced sense of market knowledge, philosophy, and comfort. A market can have depth, breadth, and flow one day. In a heartbeat, that can, will, and does change. Positions that were valuable can become illiquid. Commensurately we see their market value evaporate. We can probably all name companies—boasting in some cases, Nobel Prize winners—who got so caught up in sophistication they lost sight of common sense and basic market realities. A painful collapse in 2008 has shown once again that sophistication is no protection from hubris.

Errors in this investing sector come from several sources:

  • Misunderstanding the risks, such as credit risk, liquidity, and inflation
  • Overestimating the actual probability of the desired return
  • Unachievable expectations for positive performance because of naïve market philosophy and lack of economic insight

A scenario analysis for a security or an aggregated portfolio needs more than just a range of possible outcomes; it needs a grounded, experience-driven expectation of the most likely outcome. We feel portfolio performance is best targeted by the careful selection of individual positions whose future performance will optimally target the most likely interest rate scenario over a desired holding period.

Structured products are complex, illiquid investments whose returns may be based on the underlying price movements of a single security, a basket of securities, an index, a commodity, a debt issuance, and/or a foreign currency. Many economic and market factors will affect the value of structured products and such factors may offset or magnify each other. Risk factors may include interest rate levels, implied volatility and time remaining to maturity. Other risks may apply. Please carefully review the disclosure document or offering memorandum before investing.