The Limited Duration strategy is a true intermediate strategy typically investing in securities with maturities of 10 years or less and is benchmarked to the Bloomberg Barclays Intermediate Government/Credit Index. The portfolio primarily invests in Treasuries, Agencies and Investment Grade Corporate Bonds. The portfolios may also opportunistically invest a small portion of the portfolio in Mortgage-Backed Securities (MBS), High Yield Bonds, Convertible Bonds, Commercial Mortgage-Backed Securities (CMBS), Asset-Backed Securities (ABS) and Sovereign Debt. The portfolio duration will typically range from 3-5 years.
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.
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.
- Portfolio managers construct portfolios consistent with the investment strategy set forth by the firm’s Macro Strategy Group, which utilizes quantitative and fundamental inputs to develop portfolio strategy for sector selection, yield curve positioning and duration management.
- 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 attractive Mortgage-backed and Asset-backed Securities when those sectors appear opportunistic.
- Risk measurement is a central theme throughout our investment process so that the portfolio is not biased towards higher risk sectors.