Fixed Income Investment Strategy

Mutual TRADERS fixed income investment strategy is built around three key concepts - analyzing a broad scope of securities, identifying potential pricing inefficiencies and acquiring securities of high credit quality. The Firm’s investment professionals possess considerable expertise and experience in analyzing not only the broad fixed income market but also several niche areas within Government agency, mortgage and asset backed markets. For these sectors and others, we seek to identify and exploit pricing inefficiencies that provide enhanced yield without sacrificing credit quality.

Fixed Income Investment Process

Mutual TRADERS considers all publicly traded, domestic, international, investment grade debt as its targeted universe. The group’s sector allocation model, SAM, combines broadly available market information on the more generic sectors with internally developed data that the Firm maintains on a number of U.S. Agency sectors and other high-quality debt. This model helps Mutual TRADERS determine a justifiable yield level based on credit quality, effective duration and convexity. The attractive sectors are culled for further analysis.

Once a sector has been identified as attractive, a vigorous fundamental review is conducted. Nothing is taken for granted. If a government guaranty of any kind is involved, the nature of that involvement is closely scrutinized. Corporate and asset backed sectors are examined for credit worthiness and collateral quality. The Group securities that are collateralized and amortize, as opposed to the more generic bullet structured debentures.

At the next step, specific credit characteristics are evaluated to determine the most attractive securities within a sector. Issues selected through this process must pass a final level of quantitative analysis as the risk/reward of each security is compared against all other securities. This quantitative assessment, performed using portfolio simulation, scenario analysis, and intensive fundamental research, allows us to complete the portfolio construction process.

Fixed Income Sell Discipline

Our investment professionals are constantly monitoring the fixed income markets. When an opportunity to improve a client’s portfolio exists, we will take advantage of that by selling existing securities and purchasing securities that we feel will provide superior performance. Because of the high quality nature of our clients’ portfolios, credit deterioration is rarely an issue. However, our credit analysts constantly monitor the portfolios held for possible fundamental deterioration. We do not hold securities in our core fixed income portfolios that fall below investment grade.