Broad Market Bonds
71% of Standard & Poor's rated industrial bonds are rated below BBB. As such the program could be described as a “higher quality” market index portfolio (Source: S&P 12/31/2006).
THE ADVANTAGES OF DIVERSIFICATION
Portfolios blend investment grade and “upper tier” High-Yield bonds. The objective is to lower volatility, improve downside protection, increase yield and return. Broad Market portfolios hold over 50 issues. Each high yield bond position represents about 1% of portfolio value.
A SHORTER MATURITY ALTERNATIVE
The Short Duration Bond Strategy provides investors with an allocation to a shorter duration (3 is the constant target) portfolio. An excellent alternative to ladders for the investor attracted to short maturities.
Broad Market Strategy Profile.pdf
A Management Comparison
| The Investment Grade Allocation | Many Investment Grade Managers |
| Bottom up value | Top down market timing |
| Only Corporates | Just about anything |
| No leverage | Can leverage |
| Only straight bonds | Derivatives and futures too |
| Primarily North American | Can buy foreign |
| All Investment Grade | Can buy junk bonds |
| Always intermediate | Any maturity |
| Low turnover (25%) | High turnover (200%) |
| The High Yield Allocation | Many High-Yield Managers |
| Capital preservation first goal | High current yield first goal |
| Upper tier only (B or better) | Can buy distressed & defaulted debt |
| All North American | Can buy foreign bonds |
| Avoid convertibles | Can buy convertibles (equities) |
| Larger issues only | Any size |
| 5% issue limit | No limit |
| Low Turnover (35%) | High Turnover (100% or more) |
