The BBB Bond Fund’s investment objective is to seek to provide a total rate of return that approximates that of bonds rated within the BBB category by the three rating agencies.
Style Benchmark: Bloomberg Baa Credit Index
Fund Assets: $300 million
Fund Inception: 09.25.03
Expense Ratio: 0.17%
BBB credits provide asymmetric and cyclical return patterns, which can offer attractive returns within the investment grade bond market. However, the BBB marketplace often has with greater security specific risks. The PIA BBB Bond Fund attempts to replicate the Bloomberg Baa Credit Index, but with reduced volatility by providing broadly diversified exposure to the sector while diversifying away the inherent security specific risks.
The use of the MACS complements the firm’s individual security selection to provide a portfolio that is more reflective of our institutional fixed income management approach.
PIA deconstructs the Bloomberg Barclays Baa Credit Index into the major maturity sectors. Bonds are then selected to approximate the same maturity sector weightings as the benchmark index. We employ outside credit research services in addition to internal analysis for selected securities to help determine the weighting of the various issuers compared to the benchmark index.
The Fund primarily invests in BBB rated bonds in the following industries: Industrial, Finance, Utilities and Foreign Sovereign debt. After having determined the target sector, maturity and issuer weighting that helps approximate the index, the Adviser looks for what he believes are the most attractive issues. The Adviser may attempt to take advantage of the yield differentials among industries.
Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. The fund invests in foreign securities which involve greater volatility and political, economic and currency risks and differences in accounting methods. These risks are greater for emerging markets. Investment by the Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities. The fund may also use options and future contracts, which have the risks of unlimited losses of the underlying holdings due to unanticipated market movements and failure to correctly predict the direction of securities prices, interest rates and currency exchange rates. The Fund may invest in swaps investment derivatives. Derivatives involve risks different from, and in certain cases, greater than the risks presented by more traditional investments. These risks are fully disclosed in the Prospectus.
Tracking Error – A divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark.
Bloomberg Baa Credit Index: an unmanaged index consisting of bonds rated Baa. The issues must be publicly traded and meet certain maturity and issue size requirements. Bonds are represented by the Industrial, Utility, Finance and non-corporate sectors. Non-corporate sectors include sovereign, supranational, foreign agency and foreign local government issuers. You cannot invest directly in an index.
Bond ratings provide the probability of an issuer defaulting based on the analysis of the issuer’s financial condition and profit potential. Bond rating services are provided by credit rating agency currently registered as Nationally Recognized Statistical Rating Organizations (“NRSROs”). Bond ratings start at AAA (denoting the highest investment quality) and usually end at D. (meaning payment is in default). Securities not covered by any agency will receive a non-rated (NR) rating. The portfolio has 0% in non-rated securities.
Diversification does not guarantee a profit or protect from loss in a declining market.