The overall investment objective is to match the return versus the desired index. We seek to accomplish this investment objective by investing in U.S. Treasury securities and U.S. Government Agencies, while remaining duration-neutral to the benchmark. We expect return and risk (standard volatility of returns) to track that of the benchmark when measured over 3 to 5-year periods. We will seek anomalies and historically have added 3 – 5 basis points of excess return while providing the same volatility of the index.
In consideration of the objective, we first look to construct a portfolio that best matches the beta, term structure, and duration of the benchmark. In parallel, we seek to identify Treasuries and Agencies that provide relative value due to mispricing that occurs along the curve. We achieve this by analyzing historical z-spreads and identifying those CUSIPS that are trading rich/cheap relative to the benchmark’s yield curve. Trades are executed at 3 p.m. EST when official index closing prices are posted in order to reduce tracking error. Historically, this methodology has resulted in slight outperformance of 3 – 5 basis points of excess return while providing the same volatility of the benchmark.
Richard Familetti, CIO, U.S. Total Return Fixed Income
Michael Donelan, Managing Director and Portfolio Manager
Daniel Lucey, Managing Director and Portfolio Manager
Philip Mendonca, Managing Director and Portfolio Manager
Matthew Salzillo, Managing Director and Portfolio Manager
Please note that Sun Life Capital Management (U.S.) LLC advises on this strategy. Sun Life Capital Management (U.S.) LLC is registered with the U.S. Securities and Exchange Commission as an investment adviser and is also a Commodity Trading Advisor and Commodity Pool Operator registered with the Commodity Futures Trading Commission under the Commodity Exchange Act and Members of the National Futures Association.
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