The Low Duration Income Strategy invests in U.S. dollar denominated, investment grade fixed income securities – and seeks absolute return as well as total return versus the Bloomberg Barclays Government Credit 1 to 3 Year Index while providing protection against interest rate risk. The long-term objective of the account is to outperform the Bloomberg Barclays Government Credit 1 to 3 Year Index when measured over 3 to 5-year periods.
The Low Duration Income strategy targets a more unconstrained, absolute-return seeking institutional investor. It is managed against the Bloomberg Barclays Government Credit 1-3 Year index but seeks a higher yielding, more benchmark agnostic strategy still within the investment grade universe. This strategy is an extrapolation of how we manage the short duration portion of our Core Fixed Income strategy. The team strategically engages in issue and sector allocation to achieve absolute return by exploiting under-appreciated corporate and securitized credit opportunities (ABS, agency and non-agency MBS, CMBS and CLOs) in the front of the curve. Absolute return can occur through income generation and deep value with the securitized credit sectors. The more esoteric and less liquid nature provides of this market provides opportunities to find off-the-run deep value stories. Additionally, the securitized markets provide event driven opportunities as loan payments reduce security risk and provide potential for rating-upgrades.
The following three factors have guided the formulation of our investment philosophy:
We use a repeatable process: We believe that bottom up security selection using a repeatable process creates value. We seek “upgrade” candidates and mispriced securities (particularly in securitized credit). We look for relative value at the issue level by examining historical relationships with comparative bonds and sub-sectors to isolate mean reversion trades in both structured and corporate credit. We take a neutral stance on interest rates.
We are opportunistic: We believe in actively managing portfolios to seek relative value. We look for risk that is fundamentally or technically mispriced in order to find investment opportunities. Avoiding the downside is critical to outperformance, and we are willing to underweight any sector.
Our team is integrated: We believe portfolios are best managed by nimble teams who integrate fundamental and technical credit analysis with portfolio management execution.
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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