FIXED INCOME

Fixed Income Investing

ASB manages core and intermediate fixed income portfolios constructed through an active, disciplined investment process that aims to add value and mitigate against risk.

ASB’s actively-managed core fixed income returns are well ahead of respective benchmarks in the five styles we emphasize for almost every 1-, 3-, and 5-year period (through 9/30/16).

Since yield is the driving force for superior bond performance, ASB emphasizes high quality spread products (Corporate and Mortgage-Backed securities) in all of its bond management. Lower-yielding Government securities are typically used to implement duration and yield curve decisions or to provide additional liquidity. In addition, because of their low correlation, combining Corporates and Mortgage-Backed securities historically produces a portfolio with less volatility than Government securities alone.

The performance of the Barclays Aggregate Index since its inception in 1976 supports this invest-for-income strategy:

  • In 37 of 40 years, through 2015, the return from coupon payments has far exceeded the return from price appreciation. The cumulative return since 1976 has been: Coupon 1,670%, Price Change 18%.
  • In 40 years of index data, the Government (lowest yielding) sector has been the best performing in only 10 years.

ASB evaluates the macro-economic outlook for GDP growth, inflation, and their sources, and our fundamental analysis considers balance sheet and income statement analysis, as well as in-house and outside models. Risk control and quantitative research are also disciplines of our process.