Benchmark

Salomon Smith Barney World Government Bond Index

Objective

Maximize total return, consisting of both capital appreciation and current income, by investing in investment-grade global debt securities, with the majority of investments generally in sovereign, agency and supranational debt issues.

Investment philosophy

To select the most attractive fixed income securities within each country or market, investment management makes its decisions within a global asset allocation framework and synthesizes the ideas of senior fixed income professionals around the world.

Investment process

• Global macroeconomic and political analysis determines optimal country and currency weightings, and a maturity mix that provides opportunity for appreciation, while aiming to limit interest rate risks.
• Fundamental company research to determine intrinsic value of securities.

Benchmark

Salomon Smith Barney Non-US Government Bond Index

Objective

Maximize total return by investing in non-US fixed income markets, with the majority of investments generally in sovereign agency and supranational debt issues.

Investment philosophy

To select the most attractive fixed income securities within each country or market, the Fixed Income team makes its decisions within a global asset allocation framework and integrates the ideas of senior fixed income professionals around the world.

Investment process

• Global macroeconomic and political analysis determines optimal country and currency weightings, and a maturity mix that provides opportunity for appreciation, while aiming to limit interest rate risks.
• Fundamental company research to determine intrinsic value of securities.

Benchmark

Barclays Capital US Aggregate Bond Index

Objective

Maximize total return, consisting of both capital appreciation and income, by investing in a wide range of US investment grade (at the time of purchase) fixed income securities.

Investment process

• Combine quantitative analysis with experienced judgment to assess entire fixed income universe, including sectors, maturity intervals, quality and coupon segments, and specific fixed income securities.
• Analysis of interest rate sensitivity, maturity mix, sector valuation, as well as security-specific research.
• Seek to minimize relative portfolio risk by strict diversification limits and risk control.

Benchmark

Lehman Aggregate US Bond Index

Objective

Outperform benchmark and seek incremental return by investing in a diversified portfolio combining US investment grade (at time of purchase) bonds with opportunistic holdings in US high yield, emerging market debt and high-quality non-dollar fixed income securities.

Investment philosophy

• Markets do not always efficiently price fixed income securities relative to their intrinsic values.
• Fundamental research and proprietary valuation models seek to exploit these price-to intrinsic value discrepancies.
• Intrinsic values are based on estimations of future cash flows expected to accrue to an investor.

Investment process

• Combine quantitative analysis with seasoned judgment to assess entire fixed income universe, including sectors, maturity intervals, quality and coupon segments, and specific fixed income securities.
• Because of need for diversification when investing in high yield or emerging market debt, we generally use proprietary funds to gain exposure to these sectors.
• Currency strategy is normally fully hedged to the US dollar; up to 15% may be unhedged when significant price/value discrepancies are present.

Benchmark

Merrill Lynch High Yield Cash Pay Constrained Index

Objective

To provide high current income by investing in a diversified portfolio of higher-yield, lower-rated debt securities issued by domestic and foreign companies.

Investment philosophy

Successful high-yield fixed income investing involves capturing the market's high total return potential, while minimizing losses due to credit deterioration or default. We believe that many high-yield managers sacrifice safety while reaching for high current income. In contrast, at the forefront of our philosophy is a focus on asset coverage and maximizing preservation of principal.

Investment process

• Credit-intensive, fundamental research utilizing top-down research to assess sector fundamentals and bottom-up fundamental research to identify the best companies within each sector - i.e., companies with stable to improving credit fundamentals.
• Process is tightly coordinated within strict risk control and liquidity guidelines to ensure portfolio diversification and minimize risk of defaults.

Benchmark

J.P. Morgan Corporate Emerging Markets Bond Index Diversified

Objective

Seeks to outperform the benchmark by investing in emerging markets corporate bonds denominated in USD, and may also invest in emerging markets sovereign and/or quasi-sovereign bonds should corporate bond risk premiums over sovereign bonds be deemed unattractive.

Investment philosophy

We employ top-down macroeconomic and bottom-up credit research to develop investment themes and select appropriate securities.

Investment process

By balancing top-down and bottom-up analysis, the investment process brings together extensive experience as well as a diversity of thought and opinion from the fixed income investment committee, the emerging markets debt strategy team, and the credit research team – supported by quantitative tools and models.

• Top down analysis focuses on the global macro framework. It explores global macroeconomic trends, examines macroeconomic factors, and scrutinizes the macroeconomic risk framework. 
• Bottom-up analysis focuses on countries and sectors, considering economic, political and social factors.
• Based on the combined results, the overall allocations and risk budget are defined for the strategy, which is then implemented in specific portfolios with individual exposures to regions, countries, sectors, spreads, and currencies.
• Each portfolio is subject to continuous monitoring of positions and risks.
  

Benchmark

J.P. Morgan Emerging Markets Bond Index Global (EMBIG)

Objective

Outperform benchmark by investing in a wide range of emerging market fixed income securities issued by sovereign, agency and corporate borrowers.

Investment philosophy

• Discrepancies sometimes occur between securities' market prices and their fundamental values.
• In the case of emerging markets debt, price volatility can exceed that of underlying macroeconomic fundamentals.
• We seek to take advantage of these discrepancies by using a disciplined approach to estimate fundamental value.

Investment process

• Credit selection - In our price/value framework we search for bonds with the potential to deliver strong performance, given the firm's country and market views.
• Risk management - During portfolio construction we evaluate potential trades within a risk management framework, which compares our portfolio to its benchmark.
• Feedback - Detailed analysis allows us to measure the impact of every country and security decision made.
  

Benchmark

Citigroup 1 Year US Treasury Bill Index

Objective

Enhance yield through maturity extension and wider security selection while maintaining capital preservation by investing in investment-grade (at time of purchase) corporate debt, floating rate notes and cash equivalents.

Investment philosophy

• Exploit market inefficiencies that cause a security's price to drift away from its intrinsic value.
• Use global perspective, superior resources and seasoned judgment to make these value determinations.

Investment process

• Use comprehensive fundamental analysis of fiscal and monetary policies at the worldwide level to uncover price to intrinsic value opportunities.
• Select issues by analyzing interest rate sensitivity, maturity mix, credit, sector valuation and individual securities.
• Maturity exposure is generally maintained in a six- to 18-month range.

Benchmark

Barclays Capital Municipal Bond Index

Objective

Maximize after-tax total return (yield plus capital gain or loss after federal and state taxes), while remaining within clients' risk tolerance guidelines.

Investment process

Combines proprietary model based on relative valuation with fundamental in-depth quantitative, credit market and economic research in the following areas:

• Duration/Yield Curve Positioning - Seeks to add value over a “buy and hold” strategy by exploiting yield curve inefficiencies.
• Sector Allocation and Security Selection - Goal is to reduce risk through diversification across the credit spectrum and bond structures, while ensuring compatibility with clients' constraints and tax status.
• Market mispricings are identified through independent credit analysis.
• Relative value is assessed from clients' perspectives – monitoring state exemption status and comparing market pricing to our appraisal of value.

Benchmark

Merrill Lynch 1-2.99 Year Treasury Index

Objective

Provide actively managed total return with emphasis on a valuation-based duration strategy by investing in investment-grade (at time of purchase) corporate debt, asset-backed securities, and US Treasurys and agencies.

Investment philosophy

• Markets do not always efficiently price fixed income securities relative to their fundamental or intrinsic values.
• Fundamental research and proprietary valuation models seek to recognize and exploit these price to intrinsic value discrepancies.
• Intrinsic values are based on estimations of the future cash flows expected to accrue to an investor.

Investment process

• Combines quantitative analysis with experienced judgment to assess interest rate sensitivity, maturity mix, credit sector valuation, and individual securities.
• Maturity exposure is generally maintained in a one- to three-year range.