Thought Leadership

High Grade Core Intermediate 3rd Quarter 2010

October 21, 2010

During the 3rd quarter, our high grade strategy generated a 1.90% return, which compares to the 2.07% return of the Barclays Intermediate Aggregate and the 1.75% return of the Barclays Intermediate Aggregate excluding the kinds of securities we do not use in our conservative strategy (i.e. BBB corporates, CMBS, ABS).

As taxable yields again fell to historic lows, our risk-averse style led us to reduce portfolio duration to a more defensive posture vs. the benchmark (3.16 years vs. 3.40 years). We increasingly moved our yield curve position towards a barbell, using cheaply valued taxable municipals as the long-end of the barbell, and Treasuries as the shorter leg. The chart below shows our yield curve positioning as compared to the benchmark.