Strategic Income
Minimum Investment
$250 million
More Information
Call us at (415) 434-4441 or email at contact@osterweis.com.
Overview
Our strategic income strategy employs a multi-sector and flexible duration approach that seeks to invest in securities offering the highest risk-adjusted yield and expected total return.
Account Details
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.
Performance
Strategic Income Composite (as of 12/31/24)
| QTD | YTD | 1 YR | 3 YR | 5 YR | 7 YR | 10 YR | 15 YR | 20 YR | INCEP (10/1/2002) |
||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Strategic Income Composite (gross) | 1.49% | 8.93% | 8.93% | 5.40% | 6.49% | 5.53% | 5.70% | 6.14% | 6.60% | 7.33% | |
| Strategic Income Composite (net) | 1.32 | 8.17 | 8.17 | 4.65 | 5.74 | 4.79 | 4.96 | 5.37 | 5.78 | 6.48 | |
| Bloomberg U.S. Aggregate Bond Index | -3.06 | 1.25 | 1.25 | -2.41 | -0.33 | 0.97 | 1.35 | 2.37 | 3.02 | 3.16 | |
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
Carl Kaufman
Co-President, Co-Chief Executive Officer, Chief Investment Officer – Strategic Income & Managing Director – Fixed Income
Carl Kaufman
Co-President, Co-Chief Executive Officer, Chief Investment Officer – Strategic Income & Managing Director – Fixed Income
Carl Kaufman serves in several key roles for the firm. He has managed the Osterweis Strategic Income Fund since its inception and serves as the Managing Director of Fixed Income, as well as a co-lead Portfolio Manager for the Osterweis Growth & Income Fund. Additionally, in his role as Co-President & Co-CEO he oversees key investment matters and is an integral part of the firm’s Management Committee.
He joined Osterweis Capital Management in 2002, after nearly 24 years at Robertson Stephens and Merrill Lynch.
Carl graduated from Harvard University and attended New York University Graduate School of Business Administration.
Outside his professional endeavors, he enjoys playing classical piano and actively contributes to the community as a member of the Board of Trustees for the San Francisco Conservatory of Music, supporting the arts and enhancing the cultural fabric of the SF Bay Area. Additionally, he enjoys playing golf, an activity that continually challenges his patience and precision.
Bradley Kane
Vice President & Portfolio Manager – Strategic Income
Bradley (Brad) Kane is a Portfolio Manager for the strategic income strategy and a partner at the firm. In his role he provides clients with a low-risk way to increase wealth, leveraging his extensive experience and deep understanding of the market.
Prior to joining Osterweis in 2013, Brad 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. In these positions he learned the importance of staying focused on one’s investing strategy and discovering new securities and investor types without succumbing to trends.
Brad graduated from Lehigh University with a B.S. in Business & Economics. Outside of his professional life, he enjoys playing golf, watching lacrosse and ice hockey, and indulging in his diverse taste in music, including a particular appreciation for heavy metal.
Craig Manchuck
Vice President & Portfolio Manager – Strategic Income
Craig Manchuck, a partner at Osterweis, is a Portfolio Manager for the strategic income strategy. In this role he enjoys investing clients’ assets in a common sense way that is designed to generate good risk-adjusted returns. Throughout his career, Craig has learned the importance of patience and that relationships with company management teams are invaluable.
Prior to joining Osterweis Capital Management in 2017, Craig 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. Before that, Craig 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.
Craig graduated from Lehigh University with a B.S. in Finance and NYU Stern School of Business with an M.B.A. Outside of work, he enjoys golfing, wine, gardening, and spending time with family.
John Sheehan, CFA
Vice President & Portfolio Manager – Strategic Income
John Sheehan, a partner at Osterweis, is a Portfolio Manager for the strategic income strategy. In his role he appreciates the opportunity to contribute to clients feeling confident that their investments are positioned to meet their long-term goals. As a portfolio manager, he likes that the bond market is an ever-evolving game that blends art and science.
Prior to joining the Strategic Income team at the end of 2023, John was a portfolio manager for the total return strategy. Before that, he spent more than 20 years working at Citigroup, first as Managing Director responsible for Investment Grade Syndicate in New York City, where he advised issuers on accessing funding in the corporate bond market. Later at Citigroup, he was Managing Director in charge of West Coast Investment Grade Sales in San Francisco, where he covered several of the largest U.S. investment grade credit investors.
John graduated from Georgetown University with a B.A. in Economics. He holds the CFA designation and is a member of the CFA Society of San Francisco. Outside of work, John enjoys swimming and skiing with his family, as well as seeing live music.
Past performance does not guarantee 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 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. Net return calculation:
- Prior to 1/1/2020, the composite net return is calculated using actual advisory fees with the following exception: one member of the composite was a mutual fund portfolio whose fee was partially waived at some point due to an expense limitation agreement. The composite net return shown during this period does not reflect this waiver and is therefore lower than the actual return.
- From 1/1/2020 onward, the composite net return is calculated using actual advisory fees.
- Our fees may vary between accounts due to portfolio size, client type, or other factors.
The Bloomberg U.S. Aggregate Bond Index (Agg) is widely regarded as the standard for measuring U.S. investment grade bond market performance. This index does not incur expenses and is not available for investment. The index includes reinvestment of dividends and/or interest income.
Source for any Bloomberg index is Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg owns all proprietary rights in the Bloomberg Indices. Bloomberg does not approve or endorse this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
The fee schedule is as follows: 0.75% per annum (minimum account size $250 million). A discounted, institutional rate is available.
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.
