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.