Strategy Overview

The Moderate Duration MACS strategy is benchmarked to the Bloomberg Aggregate Bond Index and primarily invests in Treasuries, Agencies, Investment Grade Corporate Bonds and Mortgage-Backed Securities. Corporate positions are limited to 3% of the portfolio at purchase. The Moderate Duration MACS portfolio will utilize the PIA completion strategies to provide better diversification in the BBB credit and MBS sectors in an effort to provide a more attractive risk-adjusted portfolio. The portfolio duration will typically range from 3-7 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 core 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 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 attractive Mortgage-backed securities and access the sector via our completion strategy.
• 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.