High Yield Bonds
Annual Compound Returns
High Yield Bond Strategy Composite and Comparative Benchmarks
for the Period Ended December 31, 2011
| 3 Months | 1 Year | 3 Years | 5 Years | 10 Years | Inception (22.75 years) |
Sharpe Ratio | |
| CAM Before Fees | 5.87% | 5.68% | 18.10% | 6.67% | 7.06% | 8.03% | .53 |
| CAM after CAM's Fees | 5.76% | 5.25% | 17.60% | 6.21% | 6.57% | 7.47% | .46 |
| Barclay's High Yield Index 1 | 6.46% | 4.98% | 24.11% | 7.53% | 8.85% | 8.47% | .43 |
| Lipper High Yield Bond Mutual Funds AVS | 5.58% | 2.81% | 19.69% | 5.10% | 6.89% | 6.79% | .30 |
Our performance for the three months trailed the Barclays High Yield Index by 59 basis points. The difference was due primarily to 1) credit quality; we do not purchase CCC and lower-rated securities which account for approximately 18% of the Index and were up 8.42% for the period versus 6.46% for the Index as a whole; this negatively impacted our performance by 29 basis points; and 2) Sector Selection: our zero weighting in building materials, entertainment, gaming, home construction, packaging and pharmaceuticals sectors disadvantaged our performance by 34 basis points; our overweighting in consumer non-captive finance disadvantaged our performance by 18 basis points; our overweighting in the airline sector disadvantaged our performance by 46 basis points. Offsetting these negative impacts were our overweighting in preferred stocks (approximately 2.4 of our portfolio versus a zero weighting in the Index) benefitted our performance by 12 basis points; our zero weighting in chemicals, natural gas pipelines, oil field services, railroads, refining and retailers benefitted our performance by 22 basis points.
For the 12-months, we outperformed the Index by 70 basis points. The difference was due principally to 1) credit quality: CCC and lower rated securities significantly underperformed the Index as a whole and this benefitted our performance by 76 basis points; and 2) Sector Selection: our investment grade preferred stocks contributed 11 basis points to our performance relative to the Index; our overweighting of food and beverage and health care contributed 23 basis points to our outperformance; our underweighting in telecom-wireless contributed 21 basis points to our outperformance; offsetting these positive contributions were our overweighting to the transportation services and our underweighting in natural gas pipelines, oil field services , packaging, pharmaceuticals, retailers and supermarkets which disadvantaged our performance by 40 basis points and 38 basis points, respectively.
The performance of CCC rated securities in calendar 2009 (+90%) and in 2010 (+18%) resulted in the 3-year annualized Index return of 24.11% versus our 18.10%. This further impacted the 5-, 10- and longer period performance of the Index, resulting in our trailing the Index for those periods. However, our long term Sharpe Ratio has exceeded that of the Index by 23% (.53 vs. .43).
We outperformed the Lipper High Yield Bond Fund Average for the quarter (5.76% vs. 5.58%) and the twelve months (5.25% vs. 2.81%). We trailed the 3-year performance by 209 basis points as the 2009 Bond Averages exceeded our annual performance. For the 5-year and longer periods, we exceeded the Bond Fund Averages. Given the longer term performance of the higher rated credits within the Index, our 5-year and longest period returns exceeded those of the Funds as weaker quality credits significantly underperformed the Universe during many of those years. Our Sharpe Ratio has exceeded that of the Funds by 53% (.46 vs. .30).
