In our separately managed strategic 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.
Strategic Income Composite (as of 3/31/17)
|QTD||YTD||1 YEAR||3 YEAR||5 YEAR||7 YEAR||10 YEAR||SINCE INCEPTION
|Strategic Income Composite (gross)||1.79%||1.79%||13.10%||4.30%||5.76%||6.46%||6.99%||8.24%|
|Strategic 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|
|Strategic Income Composite (gross)||Strategic Income Composite (net)||Bloomberg Barclays U.S. Aggregate Bond Index|
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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.
Carl P. Kaufman
Vice President & Managing Director, Fixed IncomeView Bio
Carl P. Kaufman
Vice President & Managing Director, Fixed Income
Carl Kaufman graduated from Harvard University (B.A. in Music, cum laude) and attended the New York University Graduate School of Business Administration.
Prior to joining Osterweis Capital Management in 2002, Mr. Kaufman was a senior member of the convertible bond team at Robertson Stephens, where he focused on technology and biotech securities. Prior to that, he spent nineteen years with Merrill Lynch in their Institutional Sales office, specializing in convertible bond and equity sales and trading.
Mr. Kaufman is a principal of the firm, Managing Director of the fixed income strategy and Portfolio Manager for the Strategic Income Fund, which he has managed since its inception in 2002. He is also a lead Portfolio Manager for the flexible balanced strategy.
Bradley M. Kane
Vice President & Assistant Portfolio ManagerView Bio
Bradley M. Kane
Vice President & Assistant Portfolio Manager
Bradley Kane graduated from Lehigh University (B.S. in Business & Economics).
Prior to joining Osterweis Capital Management in 2013, Mr. Kane was a Portfolio Manager and Analyst at Newfleet Asset Management, where he managed both high yield and leveraged loan portfolios. Before that, he was a Vice President at GSC Partners, focusing on management of high yield and collateralized debt obligations. Earlier in his career, he managed high yield assets as a Vice President at Mitchell Hutchins Asset Management.
Mr. Kane is a principal of the firm and an Assistant Portfolio Manager for the fixed income strategy.
Craig L. Manchuck
Assistant Portfolio ManagerView Bio
Craig L. Manchuck
Assistant Portfolio Manager
Craig Manchuck graduated from Lehigh University (B.S. in Finance) and NYU Stern School of Business (M.B.A.).
Prior to joining Osterweis Capital Management in 2017, Mr. Manchuck was a Managing Director of Fixed Income Sales at Stifel Nicolaus, where he was responsible for sales and origination of high yield bonds, leveraged loans and post reorg equities. Before Stifel, he held a similar role at Knight Capital. Prior to that, Mr. Manchuck was the Executive Director for Convertible Securities and then High Yield/Distressed Securities at UBS. He has previous experience in Convertible Securities Sales at Donaldson, Lufkin & Jenrette, SBC Warburg and Merrill Lynch.
Mr. Manchuck is an Assistant Portfolio Manager for the fixed income strategy.
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.