Account Details

In our separately managed fixed income accounts, clients own a portfolio of fixed income securities. For these accounts we are able to customize each portfolio based on individual needs such as legacy positions, target maturity date, cash flow or income needs, etc. that may not be met by a mutual fund.

Performance

Fixed Income Composite (as of 3/31/17)

  QTD YTD 1 YEAR 3 YEAR 5 YEAR 7 YEAR 10 YEAR SINCE INCEPTION
(10/1/2002)
Fixed Income Composite (gross) 1.79% 1.79% 13.10% 4.30% 5.76% 6.46% 6.99% 8.24%
Fixed Income Composite (net) 1.61 1.61 12.31 3.58 5.01 5.68 6.14 7.33
Bloomberg Barclays U.S. Aggregate Bond Index 0.82 0.82 0.44 2.68 2.34 3.49 4.28 4.21
Fixed Income Composite (gross) Fixed Income Composite (net) Bloomberg Barclays U.S. Aggregate Bond Index
QTD 1.79% 1.61% 0.82%
YTD 1.79 1.61 0.82
1 YEAR 13.10 12.31 0.44
3 YEAR 4.30 3.58 2.68
5 YEAR 5.76 5.01 2.34
7 YEAR 6.46 5.68 3.49
10 YEAR 6.99 6.14 4.28
SINCE INCEPTION
(10/1/2002)
8.24 7.33 4.21

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Philosophy

We believe that by avoiding the “style box” trap and having the flexibility to invest in multiple classes of bonds, we can manage each portfolio in such a way as to emphasize the most attractive sector at any given time. By strategically shifting out of overvalued assets, we strive to minimize potential risk and produce better returns over time.

Furthermore, our research has shown that the various sectors of the bond market behave differently under different economic conditions. For instance, during periods of economic expansion, high yield and convertible bonds tend to perform well as rising corporate profits lead to improved credit profiles. Conversely, they tend to perform very poorly during periods of economic contraction as credit profiles deteriorate. During such recessionary periods, investment grade bonds generally prove to be better performers because of their responsiveness to declining interest rates.

Within particular sectors we choose individual securities based on rigorous fundamental and credit analysis. We emphasize a thorough understanding of each company’s balance sheet by determining the company’s ability to generate recurring free cash flow from its operations. As a result, we do a significant amount of work to determine the company’s business prospects as well as the positive and negative levers in its financial model, which influence the company’s ability to generate cash flow. We believe that we find our best investments in companies that have great products, a competitive advantage that gives them pricing power in the market, a consistent operating history, and management that operate the company as if they own it. Finally, we determine what we believe to be the appreciation potential versus the downside risk to gauge the attractiveness of the security versus other available investment opportunities.

Over time, we expect the maturity structure, credit quality, and sector concentration of the portfolio will differ during periods of economic contraction versus economic expansion. In short, we will employ a strategy based on the belief that over the long term positive returns can be achieved, and losses minimized, through careful security selection and by shifting the allocation among fixed income sectors.

Investment Team

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Past performance is not a guarantee of future results.

Rates of return for periods greater than one year are annualized. The information given for this composite is historic and should not be taken as an indication of future performance. Performance returns are presented both before and after the deduction of advisory fees. Account returns are calculated monthly, using a time weighted return method. Account returns reflect the reinvestment of dividends and other income and the deduction of brokerage fees and other commissions, if any, but do not reflect the deduction of certain other expenses such as custodial fees. Monthly composite returns are calculated by weighting account returns by beginning market value. Net returns reflect the deduction of actual advisory fees.

The Bloomberg Barclays U.S. Aggregate Bond Index (“BC Agg”) is an unmanaged index which is widely regarded as the standard for measuring U.S. investment grade bond market performance. It includes all non-convertible, fixed-rate debt issues rated investment grade or higher. This index does not incur expenses and is not available for investment. Index returns reflect the reinvestment of interest. The BC Agg Index performance is not, however, directly comparable to the composites’ performance because accounts in the composites generally in a wide range of fixed income credit qualities and maturities and the BC Agg Index is an unmanaged index that is widely regarded as the standard for measuring U.S. investment grade bond market performance.

The fee schedule is as follows: 1.00% on the first $25 million and 0.75% on assets in excess of $25 million. A discounted rate is available for tax-free institutions, eleemosynary accounts and large institutions.

Clients invested in fixed income separately managed accounts are subject to various risks including potential loss of principal, general market risk, default risk, interest rate risk, inflation risk, liquidity risk and small and medium-sized company risk. For a complete discussion of the risks involved, please see our Form ADV Brochure and refer to Item 8.

The Fixed Income Composite includes all fee-paying separately managed accounts and mutual funds that are predominantly invested in fixed income securities of various maturities and qualities, as well as income-generating equities. Individual account performance will vary from the composite performance due to differences in individual holdings, cash flows, etc.

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