High Grade Review and Outlook 3rd Quarter 2014
The commentary reviews the previous quarter and discusses our outlook and investment approach for the next quarter for our high quality taxable fixed income strategies for endowments, foundations and other non-taxable entities.
- Our view is that a Federal Funds rate increase is unlikely until the Fed meets their inflation target of over 2%.
- We increasingly moved our portfolios towards a bullet structure with a focus on the 3-7 year maturity part of the curve.
- We believe that the 3-7 year maturity bucket will outperform a barbell structure or laddered structures if the yield curve steepens.
- An important component of our yield curve strategy and security selection process is our evaluation of the “roll-down” opportunity in specific bonds.
- The 3 year part of the curve looks attractive from a roll down perspective due to the steepness of the short end of the curve.
- We rotated out of tax free municipals in Treasuries after the significant outperformance of municipals.
- We retained our over-weight to corporates based on our belief that slow but positive economic growth will favor corporate balance sheets.
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