Pacific Income Advisers

Measure Risk. Manage Return.

Advisors — Limited Duration

Strategy Overview

The Limited Duration strategy is benchmarked to the Bloomberg Intermediate Government-Credit Bond Index and primarily invests in Treasuries, Agencies and Investment Grade Corporate Bonds.  Corporate positions are limited to 3% of the portfolio at purchase.  The portfolio duration will typically range from 3-5 years.  PIA offers three versions of the Limited Duration strategy, which are listed below.  For information on what style is available in your platform, please CONTACT US.

Limited Duration MACS

The Limited Duration MACS strategy primarily invests in Treasuries, Agencies and Investment Grade Corporate securities but will opportunistically invest in Mortgage-Backed Securities (MBS), when the sector offers attractive risk-adjusted yield.   The strategy will employ individual issues and may also utilize PIA completion funds for exposure to both BBB credit and MBS. The portfolio duration will typically range from 3-5 years.

Limited Duration SMA

The Limited Duration SMA strategy primarily invests in Treasuries, Agencies and Investment Grade Corporate securities and will employ individual issues. The portfolio duration will typically range from 3-5 years.

Limited Duration SMA Enhanced

The Limited Duration SMA Enhanced strategy primarily invests in Treasuries, Agencies and Investment Grade Corporate securities but will opportunistically invest in Mortgage-Backed Securities (MBS), when the sector offers attractive risk-adjusted yield. The strategy will employ individual issues and may also utilize PIA completion funds for exposure to both BBB credit and MBS. The portfolio duration will typically range from 3-5 years.

Investment Philosophy

We know that yield curves for various sectors within the bond market are periodically torqued by cyclical, monetary or market pressures, which can lead to inefficient pricing and create opportunities to produce excess returns. We intend to exploit these periodic opportunities by risk-adjusting various bond market sectors, utilizing yield curve and sector analysis, and combining that with fundamental research to produce a portfolio that provides attractive yield while emphasizing risk measurement at both a sector and security level. We seek to capitalize on these opportunities to earn above-average risk- adjusted yields, while creating the potential for capital gains as these sectors revert toward their fair value.

Investment Process

PIA’s intermediate term investment process balances the quantitative nature of our yield curve analysis with fundamental research to produce a portfolio that emphasizes sector selection, yield curve positioning, duration management and security selection in an attempt to produce above average risk-adjusted yields in undervalued sectors, while providing an opportunity for capital appreciation.

  • PIA deconstructs the bond market into yield curve, quality and industry sectors with an emphasis on securities 10 years or less and utilizes quantitative tools to identify sectors that are undervalued on a risk- adjusted basis.
  • We combine fundamental top-down industry analysis with bottom-up fundamental security and ratio analysis to select credit securities that offer attractive yields given the security’s risk profile. Additionally, we utilize multi-factor models that produce value and risk metrics to identify Mortgage-Backed securities, if applicable, when the sector appears opportunistic.
  • Portfolio managers construct portfolios consistent with the investment strategy set forth by the firm’s Investment Strategy Group, which utilizes quantitative and fundamental inputs to develop portfolio strategy for sector selection, yield curve positioning and duration management.
  • Risk measurement is a central theme throughout our investment process so that the portfolio is not biased towards higher risk sectors.
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